Improving the Procedures for Resolving Tax Disputes in Namibia: a Case Study on Taxpayers' Right to a Fair Hearing Within a Re

IMPROVING THE PROCEDURES FOR RESOLVING TAX DISPUTES IN NAMIBIA: A CASE STUDY ON TAXPAYERS’ RIGHT TO A FAIR HEARING WITHIN A REASONABLE TIME

A THESIS SUBMITTED IN FULFILMENT

OF THE REQUIREMENTS FOR THE DEGREE OF

Master of Laws (LLM)

in the

Faculty of Law

at the

UNIVERSTY OF NAMIBIA

Loide Hamutumwa

200125532

MAIN SUPERVISOR: Dr. Tapiwa V Warikandwa

Certificate

I, the undersigned, hereby declare that, unless specifically stated otherwise in the text, the work contained in this thesis is my own original work not previously submitted in whole or in part to any other university for a degree. SIGNED ON THIS, THE 30TH DAY OF DECEMBER

2018, at WINDHOEK, NAMIBIA

______

LOIDE NDATEGELELA HAMUTUMWA

Dedication

This thesis is dedicated to my lovely husband and children for being a crucial support system during my studies. Thank you for your unwavering love. I could not have made it without you all.

Acknowledgements

I would like to thank my Lord for making this opportunity possible for me and providing me with the strength to complete this dissertation. Thank you, Almighty God.

I appreciate my husband, Mr Olavi Hamutumwa, for his love and financial support toward my studies.

I acknowledge the University of Namibia, and in particular the faculty of law, for the important role that they have played in my education. I will always be indebted to the entire faculty for inspiring and shaping my future.

I cannot forget to extend my gratitude to the management team of the Inland Revenue

Department for guiding me through the process of working and studying at the same time.

Their endless encouragement and invaluable learning has shaped me in achieving my dream of becoming a lawyer.

Without moral support from my fellow student, Mrs Liina Kalili, I would not have excelled to this level. Thank you very much indeed.

Finally, sincere thanks to my supervisor, Dr Tapiwa V Warikandwa, for the commitment you have shown me. Through your teaching, coaching and knowledge I was able to write this dissertation. May God bless you.

iii

Abstract

This dissertation improves the procedures for resolving tax disputes in Namibia. There are procedural, legal and practical loopholes in the Namibian tax system which make it costly and difficult, if not impossible, for a taxpayer to be heard and to be guaranteed procedural propriety during the dispute resolution process. Due to the fact that the Namibian tax dispute resolution system does not have permanent courts and, in most instances, lacks a sufficient number of knowledgeable lawyers and personnel, it has become a common feature of that system that taxpayers are not properly heard during disputes, and if they are heard, this is rarely accomplished in good time. This problem is further exacerbated by the absence of established and accessible guidelines that relate to the tax dispute resolution process and the common and administrative legal rights that apply to fair hearing. By improving the procedures, the study recommend that the Namibian tax dispute resolution system undergoes considerable change, from the composition and structure of the objection review committee, the tax tribunal and the special court to the appointment of competent and permanent staff to be able to devise and implement a grievance handling system that protects taxpayers’ rights. In this desktop research, both primary and secondary sources are reviewed and considered for recommendation. This dissertation argues that the fact that the finalisation of objections, reviews and appeals are not time scheduled, and the use of adhoc tax tribunal and special court, it is possible to encroach the right to be heard within a reasonable time as protected by Article

18 of the Namibian Constitution.

Keywords: Tax Revenue, Tax Dispute, Effective Dispute Resolution System, Social

Contract, Taxpayers’ Rights

Table of Contents

CERTIFICATE ...... i

Dedication ...... ii

Acknowledgements ...... iii

Abstract ...... iv

CHAPTER 1: Introduction ...... 1

1.1. Introduction ...... 1

1.2. Problem Statement ...... 12

1.3. Hypothesis...... 18

1.4. Aim ...... 18

1.5. Objectives ...... 19

1.6. Significance of this Study ...... 19

1.7. Methodology ...... 25

1.8. Justification for comparative study ...... 25

1.9. Limitations of this Study ...... 27

1.10. Assumptions ...... 28

1.11. Theoretical Framework ...... 28

1.12. Literature Review ...... 34

1.13 Chapters of this Study ...... 43

1.14. Conclusion ...... 43

1.15. Ethical Considerations Clause ...... 44

CHAPTER 2: Historical Background of this Study ...... 45

2.1. Introduction ...... 45

2.2. Tax Post-Independence ...... 46

2.3. Tax Upon and After Independence ...... 49

2.4. Conclusion ...... 51

CHAPTER 3: Tax Dispute Resolution in Namibia...... 53

3.1. Introduction ...... 53

3.2. Tax Dispute Settlement Avenues ...... 53

3.3. Issues Relating to Namibia’s Tax Dispute Resolution Procedures ...... 57

(a) Assessments ...... 58

(b) Objection ...... 59

(d) Special Court ...... 66

(e) Regular Court(s) ...... 68

3.4. Conclusion ...... 69

CHAPTER 4: Fair Hearing Within a Reasonable Time in Tax Matters ...... 71

4.1. Introduction ...... 71

4.2. Fair Hearing ...... 72

4.2.1. Audi alterem partem and nemo judex in causa sua ...... 76

4.2.2. Nemo judex in re sua: Judge in your own cause ...... 79

4.2.3. A Hearing within a Reasonable Time ...... 80

4.2.4. Tax Disputes and Administrative Law ...... 85

4.2.4.1. Administrative Law and Administrative Action ...... 88

4.3. Conclusion ...... 92

CHAPTER 5: Improving Tax Dispute Resolution Procedures in Namibia: A Comparative Perspective . 94

5.1. Introduction ...... 94

5.2. South Africa and Namibia Compared ...... 94

5.2.1. Tax Dispute Resolution in South Africa ...... 96

5.2.2. The Process of Dealing with Tax Disputes in South Africa ...... 98

5.2.2.1. Tax Assessment or Decision ...... 98

5.2.2.2. Objections ...... 100

5.2.2.3. Alternative Dispute Resolution (ADR) ...... 102

5.2.2.4. Settlement Agreements or Compromises on a Portion of Tax Debt ...... 103

5.2.2.5. Tax Board ...... 104

5.2.2.6. Tax Court ...... 105

5.2.2.7. The High Courts ...... 106

5.2.2.8. Supreme Court of Appeal (SCA) ...... 106

5.2.2.9. Constitutional Court ...... 107

5.2.2.10. The Tax Ombudsman ...... 108

5.2.3. Differences and Similarities ...... 109

5.3. Australia and Namibia Compared ...... 112

5.3.1. Tax Dispute Resolution in Australia ...... 115

5.3.2. The Process of Dealing with Tax Disputes in Australia ...... 117

5.3.2.1. Tax Assessment...... 117

5.3.2.2. Objection ...... 117

vii

5.3.2.3. Alternative Dispute Resolution ...... 118

5.3.2.4. Settlement Agreement or Compromise on a Portion of Tax Debt ...... 119

5.3.2.5. Independent Review ...... 119

5.3.2.6. Courts and Administrative Tribunals ...... 120

5.3.3. Differences and Similarities ...... 122

5.4. Conclusion ...... 125

CHAPTER 6: Conclusion and Recommendations ...... 128

6.1. Introduction ...... 128

6.2. Recommendations ...... 130

6.3. Conclusion ...... 135

Bibliography ...... 139

viii

CHAPTER 1: Introduction

1.1. Introduction

In this world, nothing can be said to be certain, except death and taxes.1 This famous aphorism draws on the actual inevitability of death to highlight the quotidian difficulty of avoiding the burden of taxes.2 “Tax” or “taxation” can be understood as a compulsory and non-optional financial contribution imposed by the legislature3 or other competent public authority4 upon the public as a whole, or a substantial sector thereof, the revenue from which is to be utilised for the public benefit and to provide services in the public interest.5 There is no doubt that taxes are important for any economy, because it is mainly through taxes that Governments can cater for the social and economic needs of their people.6 If one were to reference a principle such as the commonly referred to “social contract”,7 this would attest to the fact that Governments are given the power to rule over the people in return for provision of certain services for the betterment and benefit of the people they govern.8 In Namibia, this social contract principle is entrenched under Article 98(1) of the Namibian Constitution.9 As such, taxes become crucial,

1 National Constitution Center. 2018. Benjamin Franklin’s last great quote and the Constitution. Available at https://constitutioncenter.org/blog/benjamin-franklins-last-great-quote-and-the- constitution; last accessed on 06 November 2018. 2 National Constitution Centre (2018). 3 Messere, K.C., Owens, J.P. 1985. International Comparisons of Tax Levels: Pitfalls and Insights. Available at http://.oecd.org/tax/public-finance/35589632.pdf; last accessed 18 August 2018. 4 In Namibia, the imposition to pay tax is couched in section 5 read with section 83 of the Income Tax Act No. 24 of 1981. In as much as the Namibian Constitution does not directly impose paying of tax, the Income Tax Act is deemed as such legislation that creates the obligation for mandatory tax payment by civilians. 5 Nyambirai v National Social Security and Another 1996 (1) SA 636 ZSC at 643C-D; 1995 (9) BLLR 1221, at 1227J1228B; Carlson Investments Share Block v Commissioner, South Africa Revenue Services 2001 (3) SA 210 WLD, at 231A-B. 6 Prichard, W. 2009. Taxation and Development in Ghana: Finance, Equity and Accountability Institute of Development Studies, University of Sussex with Isaac Bentum of A, A & K Consulting. 7 Christians, A. 2008. “Sovereignty, Taxation, and Social Contract.” Minnesota Journal of International Law, Vol. 18:12. 8 Tengs, E. 2016. Taxation As a Social Contract: Public Goods and Collective Action: An empirical analysis of determinants of tax compliance in Sub-Saharan Africa. Master's thesis. Norwegian University of Science and Technology, Supervisor: Espen Moe Trondheim, p 24. 9 Article 98 of the Namibian Constitution provides that the economic order of Namibia shall be based on the principles of a mixed economy with the objective of securing economic growth, prosperity and a life of human dignity for all Namibians.

1 as they are central to the Government’s ability to fulfil its duties under the social contract, such as the provision of hospitals, medication, schools and roads, amongst other things. In addition, tax revenue reduces government borrowing;10 therefore, the tax authority should properly administer the collection of taxes by maintaining a suitable environment for overall economic development and at the same time enabling the taxpayer to expeditiously determine their tax liability and carry on with its business.11

In the day-to day operation of a tax authority, it is inevitable that disagreements between the taxpayer and the receiver of the revenue will take place.12 Considering the grave importance of paying and collecting tax for successful functioning of the country, tax determinations ought to be made in terms of section 5613 read alongside section 6714 of the Income Tax Act, and be paid in good time to allow the state continue to function, since taxes are its main source of income.15 As simple as the above may sound, it is often here that disputes arise between the taxpayer and the collector, particularly due to varying assessments of tax and monies owed to the state and primarily due to differences of opinion between the parties in the interpretation of the law or the parties have not discussed or fully understood other’s position such as to the

10 Flynn, S. Pessoa, M. 2014. Prevention and Management of Government Expenditure Arrears Fiscal Affairs Department Technical Notes and Manuals, IMF. Available at https://www.imf.org/external/pubs/ft/tnm/2014/tnm1403.pdf; last accessed 17 September 2018. When a government’s tax revenues are insufficient to pay for a given level of state spending, then a nation must borrow to make up the difference to finance for its spending. 11 Alesina, A. Favero, C. Giavazzi, F. 2018. “Climbing out of Debt”. IMF Finance and Development Magazine, Vol. 55 (1):27. 12 Thuronyi, V. 2013. How can an excessive volume of tax disputes be dealt with? Available at https://www.imf.org/external/np/leg/tlaw/2013/eng/tdisputes.pdf; last accessed on 24 April 2018. 13 Namibian Income Tax Handbook (1). PwC., Windhoek, Namibia, 2017: Section 56 of the Income Tax Act provides that a taxpayer is responsible to furnish a return of income and a computation of the tax payable, and to pay the tax so payable, and the manner of furnishing returns and interim returns. 14 Ibid. Section 67 of the Income Tax Act provides for the examination of return and assessment. The Minister shall issue a notice of assessment under section 67 to the taxpayer once he/she has examined the taxpayer’s return and computation of taxable income. 15 Prichard (2009:23).

2 amount of tax to be paid or expenses to be allowed or disallowed.16 Tran-Nam and Walpole17 stress that the administration of tax law has an intrinsic tendency to result in disputes and litigation. Accordingly, one may agree that it is in the interest of the fiscus of a nation that its tax dispute resolution mechanism is not only well established but is supplemented in such a way that it protects the relationship between the taxpayer and the receiver of revenue.18

The payment of taxes is an obligation created by public authorities (in a superior position to that of a creditor), and such administrative powers are exercised over the taxpayer who, in addition to having the main obligation of paying tax, must also fulfil the formal duties of tax compliance.19 There is no doubt that, through the payment of tax, a relationship between a citizen and the government is created.20 In the context of this study, one way to help to achieve a cooperative climate for taxation is to ensure that the taxpayer, as a person in a subservient position compared to an administrative body such as the Receiver of Revenue, is guaranteed a fair right to be heard.21

There are procedural, legal and practical loopholes in the Namibian tax system that make it costly and difficult, if not impossible, for a taxpayer to be heard and to be guaranteed procedural suitability during the dispute resolution process.22 Due to the fact that the Namibian tax dispute resolution system does not have permanent courts, and in most instances lacks a sufficient number of knowledgeable lawyers and personnel, it has become a common feature of that

16 Thuronyi, (2013). 17 Tran-Nam, B. Walpole, M. 2016. “Tax disputes, litigation costs and access to tax justice”. University of South Wales eJournal of Tax Research, Vol. 14 (2):319-336.

19 Wolf, L. 2012. “Namibian Taxation Procedure in the light of Just Administrative Action”. Namibian Law Journal, Volume No. 4:119. 20 Thuronyi, V. 2013. “How can an excessive volume of tax disputes be dealt with?” Available at https://www.imf.org/external/np/leg/tlaw/2013/eng/tdisputes.pdf; accessed on 24 April 2018. 21 Gangl, K., Hofmann, E., Kirchler, E. 2015. “Tax authorities' interaction with taxpayers: A conception of compliance in social dilemmas by power and trust.” New ideas in psychology, Vol 37:13-23. 22 Nyanga, M. Robidoux, A. Molefe, L. 2016. Tax Administration Diagnostic Assessment Tool (TADAT) Performance Assessment Report, “Effective Tax Dispute Resolution” p 32, Namibia.

3 system that taxpayers are not properly heard during disputes and, if they are heard, this is rarely achieved in a timely fashion.23 Unlike the tax systems of South Africa and Australia, Namibia does not have established and accessible guidelines that relate to the tax dispute resolution process and the common and administrative legal rights that apply to fair hearings.24Drawing on such good practices may assist Namibia in resolving tax disputes timeously.25

Fairness in resolving any disputes related to taxation is very important, particularly from a social justice perspective,26 as well as from the more practical perspective of tax morale.27 This is because it remains crucial that tax disputes are promptly and fairly resolved in order to allow such determinations to be paid into state coffers as quickly as possible and allow the government to finance its social, health, education and infrastructure development programmes.28

Article 98 of the Namibian Constitution provides for the principles of the country’s economic order.29 Although Namibia has a particularly high ratio of tax revenue to GDP in comparison to other sub-Saharan countries and collects a significant share of its revenue from direct taxes,

23 Wolf, L. 2012. “Namibian Taxation Procedure in the light of Just Administrative Action”. Namibian Law Journal, Volume No. 4:119. 24 Mphahlele, L. Erasmus, H. 2017, Southern African Accounting Association (SAAA), A comparative analysis of the respective tax dispute resolution platforms available in South Africa and Australia to conclude on the adequacy of the South Africa tax dispute resolution platforms. 25 G v The Ministry of Finance Inland Revenue Directorate (unreported case). In the Income Tax Tribunal, delivered on 17 November 2010. 26 Organisation for Economic Cooperation and Development (OECD). 2017. Report on Citizen- State Relations Improving Governance Through Tax Reform, Available at http://www.oecd.org/dac/governance-development/46008596.pdf; last accessed 9 July 2018. Citizens are more likely to perceive tax obligations more favourably when their government is seen to be acting in a trustworthy manner. Tax morale is at the heart of state building and the Citizen-State relationship. 27 Gangl et al (2015:13-23). The fairer the taxpayer’s perception of tax dispute resolution, the more positive attitude the taxpayer will have toward the tax authority and voluntary tax compliance. 28 Mpembamoto, K. 2009. An Evaluation of the Revenue Appeal Tribunal, University of Zambia. 29 Article 98 of the Namibian Constitution provides that “The economic order of Namibia shall be based on the principles of a mixed economy with the objective of securing economic growth, prosperity and a life of human dignity for all Namibians.”

4 it seems that the fiscal contract remains tenuous in Namibia.30 Interaction between tax authorities and taxpayers which pays heed to the importance of both paying taxes and timeously attending to tax disputes, thus providing an incentive to do so, can create a cooperative climate and corresponding individual motivation to cooperate.31 Thus, the government must make sure that the taxpayer trusts the tax authority if they are to willingly pay what is due.32

As it currently stands, the Income Tax Act does not provide a mandatory timeline for providing a decision on objections.33 It is apparent that instituting such timelines creates a corresponding obligation, whereby the tax authority is obliged to act within a certain timeframe, so as not to violate the rights of the taxpayer.34 Although the Customer Service Charter35 of the Inland

Revenue states that this must be done within 30 working days, it remains worrisome that such timelines are generally not adhered to.36 In the context of this study, the Namibian dispute resolution process needs to be harmonised to allow taxpayers and the tax authority to resolve their differences within a reasonable time. This is important because taxpayers’ perceptions

30 Kostiaines, E. 2018. Thesis on Taxation and Legitimancy Namibia in focus, University of Helsinki Faculty of Social Science. Available at https://helda.helsinki.fi/bitstream/handle/10138/236857/Kostiainen_Kehitysmaatutkimus.pdf?s equence=2&isAllowed=y; last accesed 3 August 2018. 31 Gangl, K., Hofmann, E., & Kirchler, E. (2015:23). 32 Alligham, M. Sandmo, A. 1972, “Income tax evasion: a theoretical analysis” Journal of Public Economics, Vol. 1:323-33. 33 Nyanga et al (2016:32). 34 S Company v The Commissioner for SARS case number IT0122/2017. Available at http://www.saflii.org/za/cases/ZATC/2017/2.html; last accessed 7 June 2018. The court held that SARS, in particular, should take the lead and should display efficiency in the conduct of litigation. It should comply with time periods, and where it does not, it should promptly raise that matter in correspondence, providing reasons and seeking written agreements to extensions. The court accepted that the amount involved was substantial, however, insofar as the delay was concerned, SARS’s conduct was “inexcusable”. It paid little, if any, regard to the proper administration of justice and the effect of its delay on the taxpayer and the fiscus. This judgment is of great interest to any taxpayers currently involved in prolonged disputes with the tax authority, in particular where there are delays on the part of the tax authority. 35 Although the Customer Service Charter of Inland Revenue Department stated that the tax queries are responded to within 30 working days depending on the nature of the query, the time taken to complete administrative review depend only the review committee objective review procedures and their availability. 36 G v The Ministry of Finance Inland Revenue Directorate (unreported case). In the Income Tax Tribunal, delivered on 17 November 2010.

5 regarding the fairness of the tax system rely heavily on how the law is applied to them.37 It therefore remains critical that the procedures relating to tax dispute resolution in Namibia are improved to benefit both the taxpayer, allowing them to be heard within a reasonable time, as well as the government, crucially allowing it to collect taxes for its budgetary expenditures.

Tax proceeds are the primary source of revenue used to meet the country’s budgetary requirements.38 Such taxes are collected by the Inland Revenue Department.39 The Namibian

Government seeks to collect revenue through a mixture of direct and indirect taxes.40 Direct taxes (income taxes) are those taxes levied on income earned and are paid towards the fiscus by each individual taxpayer, while indirect taxes comprise taxes payable on goods and services bought by taxpayers and paid to the fiscus by the service provider.41 The taxpayer may raise a dispute with the Receiver of Revenue as to the amount of tax to be paid or expenses disallowed by the Receiver of Revenue.

Before solutions can be recommended, it is important to pay attention to the status of Namibia’s tax dispute system before and after independence, and the main problems presented therein.

The Namibian tax appeal system is not new; it started many years ago during the colonial

37 Vikneswaran Manual and Ang Zhi Xin, 2016, “Impact of Tax Knowledge, Tax Compliance Cost, Tax Deterrent Tax Measures towards Tax Compliance Behavior: A survey on Self-Employed Taxpayers in West Malaysia”. Electronic Journal of Business and Management, Vol. 1 (1):56- 70. Available at http://www.apu.edu.my/ejournals/ejbm/journal/2016/Paper6; last accessed 5 June 2018. 38 Rakner, 2002, “The Politics of Revenue Mobilisation Explaining Continuity in Namibia Tax Policies”. NEPRU Working Paper No. 86. 39 Section 5 read with section 83 of the Income Tax Act provides for the levying of normal tax and recovery of taxes for the benefit of the State Revenue Fund and transfer of a part thereof to the revenue funds or representative authorities. The Ministerial Customer Service Charter provides that the Ministry of Finance is mandated to be responsible for managing the State Revenue fund, overseeing Government assets and liabilities and formulating the budget. http://www.opm.gov.na/documents/108506/197870/Charter+OPM+Finance_+Brochure.pdf/3c 62d394-87dc-4936-a79d-133e20429e10; last accessed 8 June 2018. 40 As mandated by section 5 of the Income Tax Act No 24 of 1981 and as well as the Value-Added Tax Act 10 of 2000. 41 Thuronyi, V. 2003. “Direct vs Indirect taxes”. In Thuronyi, V (Ed.) Comparative Law, Netherlands: Kluwer Law International, p. 54. Available at http://www.africataxjournal.com/wp- content/uploads/2018/04/Victor-Thuronyi-Comparative-Tax-Law.pdf; last accessed 7 June 2018.

6 system.42 Before independence, Namibian taxpayers had little protection against fiscal legislation or the decisions, actions or conduct of the Receiver of Revenue.43 It is noted that, at this time, appeals were heard by the Income Tax Special Court.44 However, it remains unclear as to whether or not there existed internal review procedures.45

Upon independence, Namibia adopted a Constitution,46 which is the supreme law of the nation, and thereby ushered in the principle of constitutional supremacy and a system of governance based on the principles of constitutionalism, the rule of law, and respect for human rights.47

What this means is that the Namibian Government was established as a sovereign, secular, democratic and unitary State founded upon the principles of democracy, the rule of law and justice for all – including taxpayer’s rights. Government powers on tax are naturally circumscribed by constitutional norms that define the relationship between government and citizen. Taxes are imposed by the legislative power;48 however, it is apparent that the power to tax rests upon necessity,49 and it is inherent in any instance of national sovereignty. The

42 Income Tax Assessing Handbook, Department van Finasies: Binnelandse Inkomste 43 Wolf, L. (2012:119). 44 Income Tax Assessing Handbook, Department van Finasies: Binnelandse Inkomste 45 Wolf, L. (2012:119) 46 In terms of Article 1 of the Namibian Constitution, the Republic of Namibia was established as a sovereign, secular, democratic and unitary State founded upon the principles of democracy, the rule of law and justice for all. 47 Ruppel, O, L Ambunda, The Justice Sector & the Rule of Law in Namibia, Framework, Selected Legal Aspects and Cases. Windhoek: Namibia Institute for Democracy Human Rights and Documentation Centre. 48 Section 5 read with section 83 of the Income Tax Act provide for the levying of normal tax and recovery of taxes for the benefit of the State Revenue Fund and transfer of a part thereof to the revenue funds or representative authorities. Section 2 of the Income Tax Act provide for the administration of the Act that “The Minister shall be responsible for carrying out the provision of this Act.” 49 The power to tax has been considered to be an essential attribute of government and a sovereign power vesting in the state, in the case of Jindal Stainless Ltd. & ANR. v State of Haryana & Ors on 11 November 2016.

7 economic order enshrined under Article 9850 of the Namibian Constitution may be considered as a pillar which allows the government to provide for its citizens.51

By virtue of the bill of rights, the Namibian Constitution confers on taxpayers – as ordinary citizens of Namibia to whom the Constitution applies – numerous rights which serve as the substantive limitations to the government’s power to tax.52 In particular, Article 1253 provides for fair hearing and places a positive duty on the tax authority to ensure that taxpayers are given a fair public hearing by an independent and impartial tribunal established by law within a reasonable time.54 The requirement for “an independent and impartial tribunal” in Article 12 may be one of the key parameters of the right to a fair hearing, because this requirement constitutes a general principle of law55 and it gives rise to one of the most fundamental of human rights.56

In Namibia, reliefs and remedies for taxpayers, in terms of the actions of the Inland Revenue

Department, exist in in four separate avenues, and these must, normally, be followed in order.

The first avenue of relief is objection.57 The taxpayer is afforded the opportunity to object to the decision of the Minister in a tax assessment.58 The Receiver of Revenue may allow or

50 Article 98 of the Namibian Constitution provides that “The economic order of Namibia shall be based on the principles of a mixed economy with the objective of securing economic growth, prosperity and a life of human dignity for all Namibians.” 51 Barker, B. W. 2006. “The Three Faces of Equality: Constitutional Requirements in Taxation”. Case Western Reserve Law Review. Vol. 57 (1). Available at: http://scholarlycommons.law.case.edu/caselrev/vol57/iss1/3; last accessed 9 October 2018. 52 Chapter 3 of the Namibian Constitution has a strong emphasis on fundamental human rights. 53 Article 12(1)(a) of the Namibian Constitution provides that, in the determination of their civil rights and obligations or any criminal charges against them, all persons shall be entitled to a fair and public hearing by an independent, impartial and competent Court or Tribunal established by law: provided that such Court or Tribunal may exclude the press and/or the public from all or any part of the trial for reasons of morals, the public order or national security, as is necessary in a democratic society. 54 Wolf, L. (2012:119). 55 Cassesse, A. 2003. International Criminal Law. Vol. 14 (1). Oxford: Oxford University Press, pp 393– 394. 56 Legal Aid South Africa v Magidiwana and Others (CCT188/14) [2015] ZACC 28; 2015 (6) SA 494 (CC); 2015 (11) BCLR 1346 (CC) (22 September 2015). 57 Wolf (2012:98-187). 58 Ibid.

8 disallow the objection. If the aggrieved taxpayer feels unhappy with the decision on the objection, the taxpayer can appeal this decision to the Tax Tribunal , which constitutes the second avenue provided for in section 73A(1) of the Income Tax Act.59 Third, the taxpayer can appeal to the Special Court for income tax in terms of section 73(1) of the Income Tax Act.60

If not satisfied with the decision of the Special Court, the matter can be forwarded to the fourth avenue for review, which is the High Court.61 The objection and appeal procedures are covered under part III62 of the Income Tax Act and part VIII63 of the VAT Act. It should be stressed that the Income Tax Act is an example of a “voluminous and complex statute”64 that has been repeatedly amended by various drafters over a long period of time.65 This means that the language contained in the law is not simple enough to be understood by a layperson. It would be facile to dismiss the length of legislation as a factor contributing to its difficulty – it is a factor, and not least a psychological one.66 On the other hand, simplicity may offer a number of potential benefits for tax administration, such as making tax law understandable and even bolstering the ability of the tax office to collect tax revenue from informal sectors.67

59 Section 73 A (1) of the Income Tax Act provides that “Any appeal referred to in section 73(1) shall in the first instance be heard by the tax tribunal.” 60 Section 73(1) of the Income Tax Act provides that “Any person entitled to make an objection who is dissatisfied with any decision of the Minister as notified to him or her in terms of section 71(4) may, subject to the provisions of section 73A, appeal therefrom to a special court for hearing income tax appeals, constituted in accordance with the provisions of this section.” 61 Article 18 of the Namibian Constitution obligates the administrative officials and bodies to justify their decisions and that reasons for those decisions must be recorded and if required be given to those affected by the decision because one can only account for one’s decision by giving reasons for the decision. Fire Tech Systems CC v Namibia Airports Company Limited (A 330- 2014) [2016] NAHCMD 220 (22 July 2016). 62 Part III of the Income Tax Act No. 24 of 1981 provides for the objection and appeals procedures. 63 Part VIII of the Value Added Tax (VAT) Act No. 10 of 2000 provides for the objection and appeals procedures. 64 Wolf (2012:98-187). 65 Clegg, D. 2016, Concise Guide to Tax in Namibia. (9) South Africa: LexisNexis. p 97 66 The length of tax legislation as a measure of complex, Office of Tax Simplification: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_dat a/file/439472/ots_length_legislation_paper.pdf; last accessed 7 July 2018. 67 Joshi, A. Prichard, W. Heady, C. (2014) “Taxing the Informal Economy: The Current State of Knowledge and Agendas for Future Research”. The Journal of Development Studies, Vol. 50 (10):1325-1347 Available at https:// www.tandfonline.com/action/showCitFormats?doi=10.1080%2F00220388.2014.940910; last accessed 4 July 2018.

The Namibian government has recently instituted the Namibian Revenue Agency (NAMRA)

Act68 in order to establish an independent tax authority, following a cabinet decision based on the national needs and the creation of a precedent for national regional benchmarks to offer an institutional environment for efficient processes, systems, skills and better provision of taxpayer and trade facilitation services.69 The objectives of such a transformation are for the tax office to modernise its technologies, motivate staff and become more efficient and user- friendly, with the end result of generating greater income by expanding the tax base and exploiting previously untapped sources.70 As the nation awaits the NAMRA transition and its full implementation, one hopes that the new tax authority will improve the tax dispute process, which will benefit both taxpayers and the country’s economy,71 which has for the past few years grappled to remain stable.

Although certain provisions under the objection and appeals sections of the Income Tax Act72 and VAT Act73 were amended, these amendments did not focus on improving the timeliness of finalising objections and appeals within a reasonable time. For example, sections 78,74

68 NAMRA Act No. 12 of 2017 Available at http://www.lac.org.na/laws/annoSTAT/Namibia%20Revenue%20Agency%20Act%2012%20of %202017.pdf; last accessed 4 May 2018. 69 Global Tax Alert Library. 2018. Namibia establishes Revenue Agency. Cabinet Decision No.14th. Available at https://www.ey.com/Publication/vwLUAssets/Namibia_establishes_Revenue_Agency/$FILE/2 018G_00315-181Gbl_Namibia%20establishes%20Revenue%20Agency.pdf; last accessed 7 May 2018. 70 Ngatjiheue, C. Namibia Revenue Authority Completion Imperative, Business Page No. 11 Available at https://www.namibian.com.na/176260/archive-read/Namibia-revenue- authority-completion-imperative; last accessed 5 October 2018. 71 Article 98 of the Namibian Constitution provide for the principles of economic orders “The economic order of Namibia shall be based on the principles of a mixed economy with the objective of securing economic growth, prosperity and a life of human dignity for all Namibians.” 72 Income Tax Act No. 24 of 1981. 73 Value Added Tax Act No. 10 of 2000. 74 Section 78 of the Income Tax Act provides that “The obligation to pay and the right to receive and recover any tax chargeable under this Act shall not, unless the Minister so directs, be suspended by any appeal or pending the decision of a court of law under section 76, but if any assessment is altered on appeal or in conformity with any such decision a due adjustment shall be made, amounts paid in excess being refunded with interest at the rate of fifteen per cent per annum calculated from the date proved to the satisfaction of the Minister to be the date on which such excess was received and amounts short-paid being recoverable with interest calculated as provided in section 79: Provided that where such date falls before 1 March 1985

79(2)75 and 80(2)76 of the Income Tax Act were amended to reduce the interest on payment of tax pending appeal from 15% to 7.5%. Furthermore, Section 73(2)77 of the Income Tax Act was amended to include a person from the mining industry as a member of the Special Court, in addition to an accountant and a member of the business community. Section 7778 of the

Income Tax Act was amended to replace a judge of the South West Africa Division of the

Supreme Court of South Africa with a judge of the High Court or Supreme Court of Namibia.

Section 71(1)79 of the Income Tax Act was amended to increase the time limit on making an objection from 21 days to 90 days, in order for the taxpayer to have enough time to object to a decision or assessment.

Similarly, in the Value Added Tax (VAT) Act, Section 27(1)80 was amended to implement the provision of an extended time period, as the Commissioner may allow good cause to be shown.

the interest payable for the period from such date to 28 February 1985 shall be calculated at the rate of seven and a half per cent.” 75 Section 79(2) of the Income Tax Act provides that “If the taxpayer fails to pay any tax in full on or before the date for payment of such tax as specified in the Act or any extension of such due date which the Minister may grant in terms of paragraph (a) of subsection (3) of section 56, as the case may be, interest shall be paid by the taxpayer on the outstanding balance of such tax at the rate of 20 percent per annum calculated as from the day immediately following such due date for payment until the day of payment.” 76 Section 80(2) of the Income Tax Act provides that “if any amount of employee’s tax is not paid in full within the period of 20 days prescribed for the payment of such amount by subparagraph (1) of paragraph 2 of Schedule 2, or if any amount of provisional tax is not paid in full within the relevant period prescribed for payment of such amount by paragraph 22, 23, or 24 or by subparagraph (1) of paragraph 26 of that Schedule, interest shall be paid by the person liable to pay the amount in question at the rate of 20 per cent per annum, calculated as from the day immediately following the expiry of the period for payment so prescribed until the day of payment, unless the Minister having regard to the circumstances of the case otherwise directs.” 77 Section 73(2) of the Income Tax provides that “Every court so constituted shall consist of a judge of the High Court of Namibia, who shall be the President of the court, an accountant of not less than ten years’ standing, and a representative of the commercial community: Provided that in all cases relating to the business of mining, if the appellant so prefers, such third member shall be a qualified mining engineer.” 78 Section 77 of the Income Tax provides that “A member of any special court or a judge of the High Court or Supreme Court of Namibia shall not solely on account of his or her liability to be assessed under this Act be deemed to be interested in any matter upon which he or she may be called upon to adjudicate thereunder.” 79 Section 71(1) of the Income Tax Act provides that “objections to any assessment made under this Act may be made within 90 days after the date of the issue of the notice of assessment, in the manner and under the terms prescribed by this Act by any taxpayer who is aggrieved by any assessment in which he or she has any interest.” 80 Section 27(1) of the VAT Act provides that “ Any person who is dissatisfied with an appealable decision may lodge an objection to the appealable decision with the Commissioner within 90

Furthermore, Section 28(4)81 of the VAT Act was amended to make an exception to the rule to grant leave to the taxpayer to provide new grounds, while Section 28(2)82 was amended to make provision for the appeal to be lodged at both the Special Court and Tax Tribunal, as the previous version only made provision for the Special Court. These amendments, however, do not focus on how the delays in resolving tax disputes can be improved. It would therefore be fair to argue that the amendments have not addressed the bureaucratic delays affecting the right of the taxpayer to a fair hearing within a reasonable time.

1.2. Problem Statement

The Receiver of Revenue makes use of a self-assessment system to collect tax; this is usually deducted automatically from wages, pensions and savings.83 People and businesses with other income must report this using a tax return.84 In order to determine the liability of the taxpayer, an assessment needs to be performed.85 Sections 67(1) and (2) of the Income Tax Act provide for how a return may be lodged.86 Assessments may be made in one of two ways: assessment based on books of account, and assessment by estimation.87 It is in this area that tension most

days after the date of issue of the notice of the decision or assessment in question or within such extended period as the Commissioner may allow on good cause shown in writing.” 81 Section 28(4) of the VAT Act provides that “In any appeal to the special court against an objection decision, the person appealing shall be limited to the grounds set out in the objection referred to in section 27(3).” 82 Section 28(2) of the VAT Act provides that “Any person dissatisfied with an objection decision may, within 60 days after the person was served with a notice of the objection decision, lodge with the Commissioner a notice of appeal to the special court for hearing income tax appeals constituted under section 73 of the Income Tax Act, 1981 (Act 24 of 1981).” 83 Wolf, (2012:98-187). 84 ibid. 85 Crawford, D. 2013. “Detailed Guidelines for Improved Tax Administration in Latin America and the Caribbean”. USAID Leadership in Public Financial Management (LPFM), p 15. 86 A return of income and computation of a taxpayer’s liability for tax furnished in accordance with section 56 shall be subject to examination by the Minister: Mugimu v Minister of Finance (HC- MD-CIV-MOT-REV2017/00128) [2017] NAHCMD 151 (19 May 2017). 87 In case of assessment based on books of accounts, the records and accounts of the taxpayer will be examined by the concerned body for assessment. Assessment by estimation, on the other hand, is made without the books and records by the taxpayer. There are different means to make the estimation; one means being relaying on the information gained from third parties. It is unavoidable that the taxpayer is at the mercy of the authority since the information they use to estimate the tax is subjective: Andrew Okello, Managing Income Tax Compliance through Self-Assessment, March 2014, IMF working paper. Available at https://www.imf.org/external/pubs/ft/wp/2014/wp1441.pdf; last accessed 6 September 2018.

12 often occurs between the taxpayer and the Receiver of Revenue as to the amount of tax to be paid or expenses disallowed. It has been observed that tax assessments in Namibia are regularly not sent out on time, thus making it difficult for the taxpayer to gain a clear picture of his tax liability in order to effectively object to the assessment.88 Thuronyi89 suggests that, after making a timely tax assessment, the tax authority should send notice of tax assessment to the taxpayer to notify them of the assessment. One tends to agree that this is beneficial, in the sense that the taxpayer would then be able to object on time.

It remains unclear how long the Receiver of Revenue must take in order to respond to tax queries, objections and appeals.90 As it is currently practiced, it is within the discretionary power of the Commissioner to determine the finalisation of objections and appeals.91

Finalisation of objections, reviews and appeals are not time scheduled.92 In as much as the

Customer Service Charter93 of the Inland Revenue states that it gives feedback to taxpayers within 30 working days, it is problematic that such timelines are generally not adhered to.94

However, the Customer Service Charter is not legislation and the Receiver of Revenue cannot be held directly to its provisions, as it is merely a statement of intent as to how it will conduct itself with respect to taxpayers' rights.95 It is important to have concrete timelines embedded

88 Wolf, (2012:98-187). 89 Thuronyi, (2013). 90 By reviewing both Acts, there are no time limits with regards as to when the taxpayer can expect the response from the Receiver of Revenue. 91 Nyanga, M. Robidoux, A. Molefe, L. 2016. Tax Administration Diagnostic Assessment Tool (TADAT). Performance Assessment Report, “Effective Tax Dispute Resolution”. p 32. 92 Ibid. 93 Although the Customer Service Charter of Inland Revenue Department stated that the tax queries are responded to within 30 working days depending on the nature of the query, the time taken to complete administrative review depend only the review committee objective review procedures and their availability. 94 G v The Ministry of Finance Inland Revenue Directorate (unreported case). In the Income Tax Tribunal, delivered on 17 November 2010, the taxpayer argued that the case took long to be finalised as a result of internal bureaucratical delays to set up the court for hearing. 95 Office of the Prime Minister, “Customer Service Charter”. Directorate: Human Resources, Administration and Finance, Windhoek, Available at http://www.opm.gov.na/documents/108506/197870/Charter+OPM+Finance_+Brochure.pdf/3c 62d394-87dc-4936-a79d-133e20429e10; last accessed 7 September 2018.

13 within tax law to create a high degree of certainty as to the consequences of taxpayers’ actions or circumstances, thereby enabling them to better understand their tax affairs.96

With regard to the reviewing of tax matters, the Income Tax Act is silent on membership of the review committee, the review committee procedures and its sitting arrangement.97 It is noted that the procedures for resolving tax disputes are generally not known by the taxpayer (unless assisted by a tax consultant), thus denying him the opportunity to challenge them.98 One tends to believe that the law must provide concrete procedures to be followed in order to reduce arbitrariness in the actions of the review committee.99

Judicial independence is a prerequisite for the rule of law and a fundamental guarantee of fair trial.100 This means that a judge in any court or tribunal shall uphold and exemplify judicial independence in both its individual and institutional aspects.101 In the absence of the above conditions, it is difficult for the taxpayer to challenge the procedure followed by the committee if, for example, arbitrariness is present.

Furthermore, the ministry of finance does not possess a permanent tax-related court to hear matters from aggrieved taxpayers.102 What this means is that where a taxpayer disagrees with

96 Australia Dispute Resolution Profile, 2018, Available at https://www.oecd.org/ctp/dispute/Australia-Dispute-Resolution-Profile.pdf; last accessed 7 September 2018. 97 Section 71(2) of the Income Tax Act refers to the objection to be entertained by the Minister if it’s delivered as delivered at his office or posted to him in sufficient time to reach him on or before the last day appointed for. 98 Nyanga (2016:32). 99 Hoexter, C. 2012. Administrative Law in South Africa (2) Cape Town: JUTA pp 369-378. 100 Ruppel, O. C. 2010. “The role of the executive in safeguarding the independence of the judiciary in Namibia”. In Bösl, A. Horn, N. du Pisani, A (Eds.) Constitutional Democracy in Namibia, Windhoek: Macmillan Education Namibia. Available at http://www.kas.de/upload/auslandshomepages/namibia/Independence_Judiciary/ruppel.pdf; last accessed 7 July 2018. 101 The Bangalore Draft Code of Judicial Conduct, 2001, (It was adopted by the Judicial Group on Strengthening Judicial Integrity, as revised at the Round Table Meeting of Chief Justices held at the Peace Palace, The Hague, November 25-26, 2002). Available at https://www.michaelkirby.com.au/.../1862-THE_BANGALORE_PRINCIPLES_OF_J...; last accessed 7 July 2018. 102 Section 73(5)(a) of the Income Tax Act provides for the appointment of the members of any such court other than judges to be appointed by the Minister by notice in the Gazette, and shall

14 the tax determination of an official of the ministry of finance, such an aggrieved person has to wait for a tribunal or special court to be constituted or convened. The Act does not provide mandatory timelines to convene such a court or tribunal, and the hearing can take up to a year, due to the fact that the Minister of Finance, in consultation with a Judge of the High Court, is mandated103 by the Income Tax Act to appoint members of such a tribunal/special court on an ad hoc basis.104 In the unreported case of G v The Ministry of Finance Inland Revenue

Directorate105, the taxpayer was unsatisfied with the slow response to the review of his objection and appeal due to logistical difficulties in the establishment of a Special Court for the case to be heard. In this case, the tribunal argued that the requirements under Article 18106 of the Namibian constitution were not complied with, in the sense that the case took a long time to be finalised, despite the taxpayer making inquiries as to the status of his case.

It is apparent that such logistical problems occur due to the fact that in terms of Section

73A(4)(a)107, the process of selecting legal practitioners to sit on the tribunal involves

hold office for five years from the date of the relevant notice: Provided that the appointment of any such member may at any time be terminated by the Minister for any reason which the Minister considers good and sufficient, and shall lapse in the event of the abolition of the court in terms of subsection (3). 103 In terms of section 73A(4)(a) of the Income Tax Act, the Minister of Finance is empowered to appoint legal practitioners to a panel from which the chairperson of the tax tribunal is to be selected and the persons so appointed shall hold office for five years from the date of the relevant notice. In terms of section 73(2) of the Income Tax Act, the Special Income Tax Court shall consist of a judge of the High Court of Namibia, an accountant of not less than 10 years standing and a representative of the commercial community. An additional member from mining sector may be selected to serve as a member of the special court on the preference of the appellant. The law requires that a member from the mining sector should be a qualified engineer. 104 In terms of section 73A(4)(a) of the Income Tax Act, the Minister of Finance is empowered to appoint legal practitioners to a panel from which the chairperson of the tax tribunal is to be selected and the persons so appointed shall hold office for five years from the date of the relevant notice. 105 G v The Ministry of Finance Inland Revenue Directorate (unreported case n the Income Tax Tribunal, delivered on 17 November 2010). 106 Article 18 of the Namibian Constitution provides that “Administrative bodies and administrative officials shall act fairly and reasonably and comply with the requirements imposed upon such bodies and officials by common law and any relevant legislation, and persons aggrieved by the exercise of such acts and decisions shall have the right to seek redress before a competent Court or Tribunal.” 107 73A(4)(a) of the Income Tax Act, the Minister of Finance is empowered to appoint legal practitioners to a panel from which the chairperson of the tax tribunal is to be selected and the persons so appointed shall hold office for five years from the date of the relevant notice.

15 recommendations made by a judge, following which such recommendations are sent to the

Minister for consideration, approval and gazetting. As it is currently practiced, members of both the tax tribunal and the special court are required by the Receiver of Revenue to be in good standing in relation to their tax affairs in order to be eligible for appointment and for their legal practitioners’ names to be gazetted in the Government Gazette.108 Since the Income Tax

Act does not provide for this requirement, the members and/or legal practitioners might not be in good standing in terms of their own taxes at that specific point in time to satisfy this requirement.109

Hearings can be delayed due to logistical arrangements, such as the requirement for legal practitioners or members to be in good standing with their taxes for their names to be gazetted and to be eligible for appointment.110 Until the court is fully constituted, the taxpayer must send a request for their hearing to the Receiver of Revenue – the same office demanding payment, which is also in control of establishing the tax tribunal and the special court – and wait for the hearing date to be confirmed.111

Although the Act provides for the appointment of legal practitioners and members to the special court, the Act is silent on the tax eligibility criteria which would set out the required range of tax proficiency (i.e. the level of tax law expertise or experience) which a “would-be tribunal/special court member” should satisfy before being appointed.112 Similarly, the Act

108 Section 73(5)(a) of the Income Tax Act provides for the appointment of the members of any such court other than judges to be appointed by the Minister by notice in the Gazette, and shall hold office for five years from the date of the relevant notice: Provided that the appointment of any such member may at any time be terminated by the Minister for any reason which the Minister considers good and sufficient, and shall lapse in the event of the abolition of the court in terms of subsection (3). 109 The requirements follow the procedures in the Procurement Act No. 15 of 2015. Available at https://laws.parliament.na/annotated-laws-regulations/law-regulation.php?id=471; last accessed 9 September 2018. 110 G v The Ministry of Finance Inland Revenue Directorate (unreported case). In the Income Tax Tribunal, delivered on 17 November 2010. 111 Wolf (2012:98-187). 112 Section 4(1) of the Lesotho Revenue Appeals Tribunal Act No.2 of 2005 makes provision of whom shall be a member to the Tribunal. The member shall be a legal practitioner with special

16 does not require tax officials or committee members who deal with objections or other internal reviews to possess relevant skills with regard to tax dispute resolution in order to effectively resolve disputes with taxpayers.113 Adequate knowledge and tax dispute training for tax officials may assist these officials in their role of resolving tax matters effectively and timeously.

Due to the fact that both the special courts and tax tribunals hear cases on an ad hoc basis,114 the manner in which such courts are constituted, the time it takes for cases to be heard and the way in which tax disputes are addressed by such courts is of great legal concern. This is problematic in the sense that the taxpayer does not have legal guidance to determine when they should expect a decision on an objection, when to elect for alternative dispute resolution, or even when a tax tribunal/court will be set up and when and where115 the appeal is to be set down. This is in fact contrary to the very spirit of the law, one of whose purposes is to create certainty for the courts as well as aggrieved individuals.116

In view of the above, the following research questions are put forward:

knowledge or skills relevant to the exercise of the powers of the Tribunal or has significant experience in taxation matters. 113 Section 27 of the VAT Act No. 10 of 200 and Section 71 of the Income Tax Act No. 24 of 1981 provides for objections submission to the Minister and Commissioner. Both provisions are silent on the eligibility of committee members who review the objections and process thereto. 114 Section 73(5)(a) of the Income Tax Act provides that the members of special court are appointed and shall hold office for the period of five years. However, the Minister may from time to time abolish any existing court. Although the court is constituted, the hearing is not automatic, it depends on the availability of such members and the process thereto with regard to (such as to be good standing with their tax obligations). It is not clear in the income tax, whether every time that a hearing take place, the members must be in good standing or not, since the tax status of a person varies on a daily basis. 115 Although the Income Tax provides for the time limitations on the side of the taxpayer to file an objection and appeal, it does not extend this obligation to the tax authority.” 116 Taha, A. 2010. "The Principle of Legal Certainty in Administrative Acts in the Light of Case Law of the European Court of Justice". Amme idaresi dergisi. Vol. 43:153-186. Available at https://www.researchgate.net/publication/291911748_The_Principle_of_Legal_Certainty_in_A dministrative_Acts_in_the_Light_of_Case_Law_of_the_European_Court_of_Justice; last accessed 14 September 2018. (Legal Certainty is the principle that ensures the realisation of the principle of rule of law, primarily in Administrative Law as well as in all other fields of law).

i. How can Namibia improve on the time taken to respond to objections and appeal

requests;

ii. How can Namibia improve the process of convening tax tribunals/special courts and

the appointment of members to such forums;

iii. How can Namibia ensure that the rules, processes and standards of tax dispute

resolution are accessible to the taxpayer, thus fostering proper communication and tax

compliance; and

iv. Is it time for Namibia to enact the tax administration act which governs the rules and

procedures for objections and tax appeals?

1.3. Hypothesis

In attempting to evaluate the above research questions, the following hypothesis testing are put forward:

i. Timelines create a suitable foundation between taxpayer and government to enjoy a

stable and predictable fiscal environment.

ii. Interaction between a tax authority and taxpayer result in a cooperative climate iii. Access to tax information reduces compliance costs. iv. Simplified law enhances clarity

1.4. Aim

The aim of this study is to improve the procedures for resolving tax disputes within a reasonable time in Namibia, in respect of taxpayers’ right to a fair hearing. The rationale for this research lies in the lack of firm guidelines for tax dispute resolution as well as the use of ad hoc court

18 systems which impairs the very heart of the work of the ministry of finance, as well as that of aggrieved taxpayers.117

1.5. Objectives

In view of the aim of the study, one is content that, the above desired outcome will be achieved by:

(a) Improving on the time taken to respond to objections and appeal requests;

(b) Improving the process of convening tax tribunals/special courts and appointing

members to such forums;

taxpayer to foster proper communication; certainty; tax compliance; and

(d) Enacting the tax administration act which governs the rules and procedures of

objections and tax appeals.

1.6. Significance of this Study

Tax systems are a fundamental component of any attempt to build a nation.118 In an economy such as that of Namibia,119 which has for the past few years grappled for stability, the importance of collecting the correct amount of tax at the appropriate time cannot be

117 Taha, A. 2010. "The Principle of Legal Certainty in Administrative Acts in the Light of Case Law of the European Court of Justice". Amme idaresi dergisi. Vol. 43:153-186. Available at https://www.researchgate.net/publication/291911748_The_Principle_of_Legal_Certainty_in_A dministrative_Acts_in_the_Light_of_Case_Law_of_the_European_Court_of_Justice; last accessed 14 September 2018. (Legal Certainty is the principle that ensures the realisation of the principle of rule of law, primarily in Administrative Law as well as in all other fields of law). 118 Brautigam, D. 2008. “Introduction: Taxation and State-Building in Developing Countries”. In Brautigam, D. Fjeldstad, O. Moore, M. (Eds.), Taxation and State-Building in Developing Countries: Capacity and Consent Cambridge: Cambridge University Press, pp 1-33. 119 Article 98 of the Namibian Constitution provide for the principles of economic orders “The economic order of Namibia shall be based on the principles of a mixed economy with the objective of securing economic growth, prosperity and a life of human dignity for all Namibians.”

19 overemphasised.120 It is therefore crucial that the efficient and effective collection of revenue is not compromised by delays in finalising tax matters.121

It is a fact that revenue gained from tax is a significant contributor to a country’s economy. It is also a fact that, while working together, the taxpayer and the tax authority will encounter disagreements as to what exactly is due to each party.122 Thus, to safeguard this important source of income, the government must make sure that the taxpayer has trust in the tax authority and will therefore willingly pay what is due.123 The interaction between tax authorities and taxpayers may result in a cooperative climate, and corresponding individual motivation to cooperate.124 To build such trust, it is imperative for the government to acknowledge and respect the fundamental rights of taxpayers, which are recognised under Article 12125 and

Article 18126 of the Namibian constitution, as well as other tax law. This study seeks to promote a better balance between, on the one hand, the powers and duties of the tax authority to tax and collect what is due to the State and, on the other, the right of taxpayers to a fair hearing to enable a transparent relationship. Such a balance may make a great contribution to the equity and fairness of tax administration.

120 2017. “EU got it wrong on tax haven accusations”. New Era Newspaper. Available at https://neweralive.na/posts/eu-got-it-wrong-on-tax-haven-accusations; last accessed 5 April 2018. 121 Tax Administration Act No. 28 of 2011. 122 Thuronyi (2013). 123 Alligham (1972:323-338). 124 Gangl et al (2015:13-23). 125 Article 12(1)(a) of the Namibian Constitution provides that , in the determination of their civil rights and obligations or any criminal charges against them, all persons shall be entitled to a fair and public hearing by an independent, impartial and competent Court or Tribunal established by law: provided that such Court or Tribunal may exclude the press and/or the public from all or any part of the trial for reasons of morals, the public order or national security, as is necessary in a democratic society. 126 Article 18 of the Namibian Constitution provides that administrative bodies and administrative officials shall act fairly and reasonably and comply with the requirements imposed upon such bodies and officials by common law and any relevant legislation, and persons aggrieved by the exercise of such acts and decisions shall have the right to seek redress before a competent Court or Tribunal.

Tax dispute resolution is essential to the success of any modern tax system.127 Mookhey128 commends the Australian tax dispute resolution system as following many of the Dispute

System Design (DSD) principles of best practice, such as: involving stakeholders in the design process; providing multiple options for addressing conflict; providing loop-back mechanisms; allowing for notification before and feedback after the dispute resolution process; the inclusion of ‘internal independent confidential neutrals’ in the system (for ATO officers); the arrangement of formal dispute procedures in a low-to-high cost sequence; and the provision of assistance in choosing the best process. The approach of the ATO, and its conflict resolution model, support the assumption of seeking to resolve the problems experienced by taxpayers in order to better achieve its own goals of increased revenue and taxpayer compliance.129

Although it is also stressed that the ATO model should be more flexible to allow taxpayers to give feedback on the handling of their complaint, its approaches to resolving disputes timeously are commendable.130

In addition, the ATO’s dispute resolution approach follows its Dispute Management Plan, which is aligned with the mission, vision and values of the organisation.131 There are also several internal and external mechanisms to evaluate the system, which serve to foster the continuous improvement of its dispute resolution procedures.132 Mookhey concludes that the

ATO dispute resolution model possesses “much of the best-practice principles advocated by

127 Stokes, A. Wright, S. 2013. "Does Australia Have A Good Income Tax System?". International Business & Economics Research Journal (IBER). Vol. 12:533. Available at https://www.researchgate.net/publication/297721690_Does_Australia_Have_A_Good_Incom e_Tax_System; last accessed 14 September 2018. 128 Jone, M. 2015. “Evaluating Australia’s tax dispute resolution system: A dispute systems design perspective”. eJournal of Tax Research Vol. 13 (2): pp. 552-580. 129 Jone (2015:552-580). 130 Bentley, Duncan (1996) "Problem Resolution : Does the ATO Approach Really Work?". Revenue Law Journal. Vol. 6 (1):1 Available at http://epublications.bond.edu.au/rlj/vol6/iss1/3; last accessed 7 October 2018. 131 Jone (2015:552-580). 132 ibid.

21 the Ury, Brett and Goldberg model such as clear, multi-step procedures and emphasis on negotiation, notification and consultation”.133

Tax disputes need to be handled and amended appropriately before they begin to have negative repercussions (such as tax evasion134 and transfer pricing135) for the economy, since taxation is an important driver of a country’s economy.136 For a tax system to be deemed successful, it must provide a sustainable source of revenue, adequate to the needs of the government, and meet the objectives of assisting economic growth, providing for the appropriate distribution of income and performing a stabilisation function.137 For the purpose of this study, it is essential that any disputes that may negate the timely collection of revenue are resolved expeditiously, with due regard to the law, in an environment where all parties to the dispute have a say in the dispute resolution process.138 There is no doubt that having a clear underlying process for tax dispute resolution that protects the due process right of taxpayers and ensures timeliness139 can

133 ibid. 134 Organisation for Economic Cooperation and Development (OECD). Centre for Tax Policy and Administration. Glossary for Tax Terms. Available at http://www.oecd.org/ctp/glossaryoftaxterms.htm; last accessed 3 October 2018. (Tax evasion is generally used to mean illegal arrangements where liability to tax is hidden or ignored, i.e. the taxpayer pays less tax than he is legally obligated to pay by hiding income or information from the tax authorities). 135 Ibid. (A transfer price is the price charged by a company for goods, services or intangible property to a subsidiary or other related company. Abusive transfer pricing occurs when income and expenses are improperly allocated for the purpose of reducing taxable income.) 136 Omar, M. 2017. “How quick resolution of tax disputes spur economic growth.” Standard Digital Media. Available at https://www.standardmedia.co.ke/article/2001235239/how-quick- resolution-of-tax-disputes-spur-economic-growth; last accessed 7 February 2018. (Prolonged legal disputes with the tax authorities may have considerable implications for the taxpayer’s operations, sometimes even for an enterprise’s liquidity). 137 Bird, R. M. 1992. Tax Policy and Economic Development. Baltimore: John Hopkins Press 138 Zambia Revenue Authority, “The Dispute Resolution Process”. Brief of Dispute Resolution Process for the Taxes and Duties Administered by the Commissioner General. Available at https://www.zra.org.zm/download.htm?URL_TO_DOWNLOAD=//web_upload//PUB//DISPUT E%20RESOLUTION%20PROCESS%20PAMPHLET-2017091310112017092339.pdf; last accessed 17 October 2018. 139 Australian Government Inspector-General of Taxation. 2016. Review into the Taxpayers' Charter and Taxpayer Protections. Available at https://cdn.tspace.gov.au/uploads/sites/16/2016/12/Review-into-the-Taxapyers-Charter-and- Taxpayer-Protections.pdf; last accessed 7 July 2018. (Taxpayers and other stakeholders are frustrated with tax system that, in many cases, provides no definitive or conclusive way of resolving tax disputes in a timely and efficient manner. Such conditions inevitably lead to prolonged controversies and inequitable results).

22 create a suitable foundation for both taxpayers and the government to enjoy a stable and predictable fiscal environment to promote growth and reduce poverty.

It is an established principle that simplified law enhances clarity.140 With regard to tax law, the principle of simplicity as a canon of taxation requires tax laws to be clear and easily understandable to a lay citizen.141 Tax disputes deserve special attention because they tend to be more complex.142 This means that taxpayers do not necessarily know how much tax they have to pay, to whom and by what time, as well as related procedural information. To some extent, citizens do not pay tax simply because they do not understand tax law and its principles.143 It is easier for a taxpayer to fully comply with a law he or she understands than with a law that is overly technical, and therefore difficult to understand and comply with.144

Alley and Bentley145 state that “tax rules should not be arbitrary”. A simple tax system allows taxpayers to comply with the rules in a cost-effective manner.146 Palilm and Mustapha147 argue that when a tax system lacks simplicity, this results in a greater number of taxpayers making errors, being non-compliant and disrespecting the system. However, while the concept of a

140 In Commissioner for the SARS v Airworld (2007) 70 SATC 34 (SCA) the SCA considered the meaning of the term ‘beneficiary in the context of certain section of the Income Tax Act, noting that they dealt with a tax which was sui generis and that their ‘settings and surrounds’ were therefore quite restricted. The Court urge that, ambiguity or uncertainty arises where the meaning of the words used is not absolutely clear. 141 Blank, J. D. Osofsky, L. 2016. "Simplexity: Plain Language and the Tax Law". New York University Law and Economics Working Papers. 434. Available at https://lsr.nellco.org/nyu_lewp/434; last accessed 8 July 2018. 142 Tran-Nam et al (2012). 143 Ernst & Young. Tax transparency, seizing the initiative. Available at https://www.ey.com/Publication/vwLUAssets/Tax_Transparency_- _Seizing_the_initiative/$FILE/EY_Tax_Transparency.pdf; last accessed 4 June 2018. 144 Merrlees, J. 2011. “The Economic Approach to Tax Design”. In Tax by design. Oxford: Oxford University Press. Available at https://www.ifs.org.uk/uploads/mirrleesreview/design/ch2.pdf; last accessed 20 June 2018. 145 Alley, C. Bentley, D. 2005. A remodelling of Adam Smith’s tax design principles. Robina: Bond University. Available at http://epublications.bond.edu.au/law_pubs/45; last accessed 5 July 2018. 146 James, S. 2018. Tax Simplification is Not a Simple Issue: The Reasons for Difficulty and a Possible Strategy. Reader in Economics Thesis. University of Exeter. Available at https://business-school.exeter.ac.uk/documents/papers/management/2007/0718.pdf; last accessed 7 October 2018. 147 Palilm, M. and Mustapha, A. 2011. “Determinants of Tax Compliance in Asia: A Case of Malaysia”. European Journal of Social Sciences. Vol. 24 (1):7-32.

23 simple system implies that the rules should be comprehensible, this should not come at the expense of achieving equity.148 In the context of this research, attempting to understand why people pay taxes and the disputes which arise from this process, it is therefore of great interest that not only to tax academics but also taxpayers and administrators fully understand tax law and administrative justice.

Public awareness of the existence of review committees and tribunals/special courts remains dismally low in Namibia.149 The procedures for resolving tax disputes, both internally and externally, are not well known.150 Yet far less is understood about the effective accessibility of external tax dispute resolution from the taxpayer’s perspective.151 It is apparent that there are serious knowledge gaps concerning the important but neglected connection between tax dispute resolution and tax justice.152 One could contend that the increasing deficiency in knowledge of tax procedures may be a result of a lack of tax proficiency and of dissemination of information to the public (e.g. fiscal and financial literacy to foster tax compliance), as well as a lack of simplicity in tax regulations and procedures. Such a lack of knowledge has motivated this researcher to improve on the due process of tax dispute resolution in Namibia. The present study is therefore important, because it may potentially shed light on these pertinent issues and, hopefully, close this knowledge gap and help to change law and policy which influences the field of tax dispute resolution.

148 Le Grad, J. 1984. “Equity as an Economic Objective”. Journal of applied Philosophy. Vol. 1(1): 39-51. 149 Nyanga et al (2016:32). 150 ibid. 151 ibid. 152 Organisation for Economic Cooperation and Development (OECD). Report on State Building Accountability. Available at http://www.oecd.org/tax/tax-global/work-on-statebuilding- accountability-effective-capacity-development.htm; last accessed 12 July 2018. (The tax morale is at the heart of state building and the citizen-state relationship. The fairer the taxpayer’s perception of tax disputes resolution and access to process for resolving tax disputes that is effective, access to a fair impartial and independent process is key).

There is no authoritative tax textbook in Namibia concerning dispute resolution. However, information emerging from an international literature review and legal writings on the research question will be valuable in making various recommendations on resolving tax dispute. This research may help interested parties to gain some understanding of the problems observed in the study and how they may be tackled. It may also provide inspiration for further research in this area.

1.7. Methodology

A literature review was undertaken to determine how the resolution of tax disputes in Namibia can be improved. This review used, amongst other sources, statutes, publications, books, e- journals, electronic resources and theses. A comparative analysis was undertaken in respect of objections and appeal reviews under the South Africa Tax Administration Act153 and the

Australia Tax Administration Act,154 looking at the differences and similarities of both acts to

Namibian objections and appeals procedures and how these procedures can be improved in order to resolve tax disputes within a reasonable time. The findings of this comparison were considered for recommendation.

1.8. Justification for comparative study

Due to the confidentiality and controversies surrounding tax and how tax disputes are handled to protect the rights of the taxpayer, this area of law remains under- researched. However, it is necessary to make use good practices as to how tax disputes are resolved by looking at one of

153 The Tax Administration Act 28 of 2011 of South Africa. Available at http://www.saflii.org/za/legis/num_act/taa201128o2011g35491267.pdf; last accessed 7 September 2018. 154 The Tax Administration Act of 1953 of Australia. Available at https://www.legislation.gov.au/Details/C2017C00213; last accessed 8 September 2018.

25 developing countries such as South Africa and an organisation for economic cooperation and development (OECD) countries like Australia.

South Africa is taking the leading role in resolving tax disputes, enacted the South African

Revenue Service Act 34 of 1997 (an autonomous organisation of the state) to effectively deal with tax matters and most SADC countries are drawing on such good practices.155

On the other hand, Australia is one of the OECD developed and industrialised countries and a leader in the field of e-governance.156 The Australian tax dispute resolution system follows the

Disputes System Design (DSD) principles of best practices in resolving disputes as discussed in the significance of the study and literature review. Drawing on such good practices may assist Namibia in reforming the existing law to better the status quo. Furthermore, the ATO has a taxpayer charter that provide for taxpayer’s rights and it does make use of a wide range of international measures aimed at combating tax avoidance through more comprehensive exchange of information between countries.157 Australia does make use of the OECD pillars of compliance which measures assurance and confidence in tax compliance. Although,

Namibia is not a member of the OECD, however, it makes use of the best practices such as the

Base Erosion and Profit Shifting standards (BEPS) and exchange of information for tax disputes. Namibia, South Africa and Australia are both members of the Commonwealth Group.

155 Quack, E. 2018. Tax coordination and tax harmonisation within the regional economic communities in Africa. K4D Helpdesk Report. Brighton, UK: Institute of Development Studies. Available at https://assets.publishing.service.gov.uk/media/5b18f76c40f0b634fb505ce/Tax_Coordination_ withing_Regional_Economic_Communities_Africa.pdf; last accessed 19 April 2019. 156 Klemencic, I. Gadzo, S. 2017. "Effective international information exchange as a key element of modern tax systems: promises and pitfalls of the OECD's common reporting standard." Public Sector Economics Vol. 41 (2): 226. 157 Australian Government Inspector-General of Taxation. 2016. Review into the Taxpayers' Charter and Taxpayer Protections. Available at https://cdn.tspace.gov.au/uploads/sites/16/2016/12/Review-into-the-Taxapyers-Charter-and- Taxpayer-Protections.pdf; last accessed 7 April 2019.

In comparison to South Africa158 and other jurisdictions such as Australia,159 Namibia does not have a Promotion of Administrative Justice Act (PAJA)160 to give rise to the Tax

Administrative Act (TAA), to make provision to the gazette policy guidelines161 in relation to the process for tax dispute resolutions. Both South Africa and Australia have an improved system; in particular, the ADR and settlement processes are available to the taxpayer prior to the consideration of litigation.162

1.9. Limitations of this Study

Time to complete the dissertation has been a limitation, as the candidate has to change supervisors in the middle of the term. The use of domestic and regional literature on the resolving tax disputes within a reasonable time was a considerable limitation. Namibia does not have an authoritative text on tax law, and its case law related to tax is scanty. As a result, it is difficult to effectively compare the situation in this field of law, as resources are insufficient, and the status quo is often unreported. However, the information emerging from international literature review and legal writing on the subject matter is valuable in making

158 Rakner, L. 2002. “The Politics of Revenue Mobilisation Explaining Continuity in Namibia Tax Policies”. NEPRU Working Paper No. 86, Windhoek. (Namibia achieved its independence 21 March 1990 after 70 years of South African rule that replaced the German protectorate established in 1884. Since independence, Namibia’s economic has been link to that of South Africa. Few changes took place in the tax regime of Namibia. Otherwise, the tax system is based on modification of the system of taxation that existed in South West Africa). 159 Smit, N. 2012. “Australia opens consulate in Namibia”. The Namibian Newspaper. (Namibia relations dated back to 1970s and 1980s, supported United Nation (UN) action with the peacekeeping operation in Namibia. The relations between two countries is growing in the range of common interest and shared objectives, especially in the commercial sector. The taxpayer rights and protection Charter in Australia has assisted taxpayers in resolving disputes). 160 The Promotion of Administrative Justice Act No 3 of 2000. 161 Government Gazette No. 29742 of South Africa. 2007. Vol. 501, p 3. Available at https://www.greengazette.co.za/pages/government-gazette-29742-of-28-mar-2007-vol- 501_20070328-GGN-29742-00003; last accessed 9 August 2018. 162 Leshego, M. Henriett, E. 2017. “A comparative analysis of the respective tax dispute resolution platforms available in South Africa and Australia to conclude on the adequacy of the South Africa tax dispute resolution platforms”. Southern African Accounting Association, SAAA. Available at http://www.saaa.org.za/Downloads/Publications/TAX016%20A%20comparative%20analysis %20of%20the%20respective%20tax%20dispute%20resolution%20platforms%20available%2 0in%20SA%20and%20Australia.pdf; last accessed 4 June 2018.

27 various recommendations and comparisons on how the procedures for resolving tax disputes in Namibia can be resolved.

Older references can be outdated. Still, older sources may be more relevant than newer ones.

This may depend on the topic, and the historical rationale of befittingly understand the problem.

Accordingly, one recognises the date ranges and type of references used in this study. Yet, the literature has been influential in developing a field of study as tax disputes is concern. For example, drawing on the principles advocated by the Ury, Brett and Goldberg model such as clear, multi-step procedures and emphasis on negotiation, notification and consultation, various studies used in this study have reached conclusions using this persuasive best practice. It is much better for the researcher to build on academic knowledge and integrity by citing such observed studies as original or secondary source. The limitation of too much reliance on old literatures is addressed by making use of recent primary sources like the PAJA and TAA and case law on administrative law, which covers tax administration and dispute resolution.

1.10. Assumptions

There is an underlying assumption that the occurrence of disputes in human society is endemic.

Disputes are inevitable when people with different interest deal with each other on a regular basis. Particularly, tax authorities across the world face various disputes with taxpayers due to differences in the interpretation or application of tax law.

1.11. Theoretical Framework

Various theories and principles have been used to construct and explain a dispute resolution system that guarantees procedural certainty in taxation. The primary object of every legal system is to render justice.163 This study deliberates on the well-known, frequently used

163 Mance, L. 2011, Should the law be certain? The Oxford Shrieval lecture, University Church of St Mary The Virgin, Oxford. Available at https://www.supremecourt.uk/docs/speech_111011.pdf; last accessed 11 September 2018.

28 aphorism “Justice delayed, justice denied”,164 which implies that faster justice is better justice.165 As tax affects every section of society in one way or another, it should be levied very carefully with a view to avoiding unnecessary hardship to the taxpayer.166 The debate on tax was first started by Adam Smith.167 The general approach to taxation is founded on four principles: certainty,168 convenience,169 efficiency170 and proportionality to the ability to pay.171

These principles still influence official thinking today, concerning how the tax system should

164 Sourdin, T. Burstyner, N. 2014. “Justice delayed is justice denied”. Victoria University Law and Justice Journal, Vol. 4 (1):46-60. Available at https://search.informit.com.au/documentSummary;dn=924566477591819;res=IELHSS; last accessed 5 June 2018. “Justice delayed is justice denied" is a legal maxim meaning that if legal redress is available for a party that has suffered some injury, but is not forthcoming in a timely fashion, it is effectively the same as having no redress at all. This principle is the basis for the right to a speedy trial and similar rights which are meant to expedite the legal system, because it is unfair for the injured party to have to sustain the injury with little hope for resolution. The phrase has become a rallying cry for legal reformers who view courts or governments as acting too slowly in resolving legal issues either because the existing system is too complex or overburdened, or because the issue or party in question lacks political favour. Here are conflicting accounts of who first noted the phrase. According to Respectfully Quoted: A Dictionary of Quotations, it is attributable to William Ewart Gladstone, but such attribution was not verifiable. Alternatively, it may be attributed to William Penn in the form "to delay Justice is Injustice. Martin Luther King, Jr., used the phrase in the form "justice too long delayed is justice denied" in his "Letter from Birmingham Jail", smuggled out of jail in 1963, ascribing it to a "distinguished jurist of yesterday." 165 An appeal should be heard within a reasonable time, although it is difficult to gauge what a reasonable time is as this is dependable to each jurisdiction, depending upon the review structure and its resources and capacity. 166 Bird, R. M. 2014. “Administrative Dimensions of Tax Reform”. In Annals Of Economics And Finance 15-2, pp 269–304. Available at http://aeconf.com/Articles/Nov2014/aef150202.pdf; last accessed 27 June 2018. 167 Butler, E. 2011. The Condensed Wealth of Nations and The Incredibly Condensed Theory of Moral Sentiments. England: ASI (Research). Available at https://static1.squarespace.com/static/56eddde762cd9413e151ac92/t/56fbaba840261dc6fac3 ceb6/1459334065124/Condensed_Wealth_of_Nations_ASI.pdf; last accessed 9 October 2018. These principles were articulated in the 18th century by Adam Smith in the Wealth of Nations (first published in 1976), Book V Chapter II Pt II, p.825 para 4. 168 Ibid. This canon of taxation suggests that the tax which an individual has to pay, should be certain and not arbitrary. It should be certain to the taxpayer how much tax he has to pay, to whom and by what time the tax is to be paid. The place and other procedural information should also be clear. It would protect the taxpayer from the exploitation of tax authorities in any way. 169 ibid. According to this canon of taxation, every tax should be levied in such a manner and at such a time that it affords to the maximum of convenience to the taxpayer. According to Adam Smith, a good taxation policy must be convenient for the taxpayer. The Government should see that the taxpayer suffers no inconvenience. 170 Ibid. This canon of taxation suggest that it is always better to impose the taxes that are able to produce larger returns. More taxes tend to create panic, chaos and confusion among the taxpayers and it is also against the canon of certainty and convenience to some extent. 171 Ibid. This canon of taxation suggests that people should contribute tax in proportion to their income and wealth.

29 be seen to be efficient and fair as part of the contract between citizens and government.172 In improving the grievance handling system to protect taxpayers’ rights, one must focus on the purpose behind taxation, which is the redistribution of wealth and income.173 It has at times been regarded as unfair that everyone should pay the same tax, whether they were rich or poor.174 There has been the feeling that these systems are designed to punish the rich.175

However, the aim of this is to avoid a perilous income situation, which proponent economists describe as unreasonable or extreme inequality. The clash between the poor and the rich is at the heart of Marx’s theory on conflict.176

The occurrence of disputes in human society is endemic, and has been since time immemorial.177 Disputes are inevitable when people with different interests deal with each

172 Alley, C. Bentley, D. 2005. "A remodelling of Adam Smith’s tax design principles". Bond University Law Faculty Publications. Available at http://epublications.bond.edu.au/law_pubs/45; last accessed 25 June 2018. 173 Luebker, M. 2014. “Income Inequality, Redistribution, and Poverty: Contrasting Rational Choice and Behavioral Perspectives”. Wiley Online Library Review of Income and Wealth. Vol. 60 (1). Available at https://doi.org/10.1111/roiw.12100; last accessed 22 May 2018. Income Redistribution is an economic practice which is aimed at levelling the distribution of wealth or income in a society through a direct or indirect transfer of income from the rich to the poor. It is important to recognise what Income Redistribution is and what it is not. Wealth redistribution refers to the seizure of assets from the rich in society and distributing them to other poor members of society. Unlike Wealth Redistribution, Income Redistribution does not take away the hard earned properties of people. Income redistribution uses strategic economic policies to transfer income from the rich to the poor, and it does not involve forceful acquisition of people’s assets. 174 Luebker (2014). Income Redistribution is an economic practice which is aimed at levelling the distribution of wealth or income in a society through a direct or indirect transfer of income from the rich to the poor. It is important to recognise what Income Redistribution is and what it is not. Wealth redistribution refers to the seizure of assets from the rich in society and distributing them to other poor members of society. Unlike Wealth Redistribution, Income Redistribution does not take away the hard earned properties of people. Income redistribution uses strategic economic policies to transfer income from the rich to the poor, and it does not involve forceful acquisition of people’s assets. 175 Ibid. Income Redistribution is an economic practice which is aimed at levelling the distribution of wealth or income in a society through a direct or indirect transfer of income from the rich to the poor. It is important to recognise what Income Redistribution is and what it is not. Wealth redistribution refers to the seizure of assets from the rich in society and distributing them to other poor members of society. Unlike Wealth Redistribution, Income Redistribution does not take away the hard earned properties of people. Income redistribution uses strategic economic policies to transfer income from the rich to the poor, and it does not involve forceful acquisition of people’s assets. 176 Bell, P. Cleaver, H. 2002. “Marx's Theory Of Crisis As A Theory Of Class Struggle. The Commoner. Available at http://www.commoner.org.uk/cleaver05.pdf; last accessed 5 August 2018. 177 Meyer. B, 2000. The Dynamics of Conflict Resolution: A Practitioners’ Guide

30 other on a regular basis.178 Dispute resolution was not a serious factor when society did not have to grapple with complex issues.179 However, the passing of time and the development of various social issues has necessitated a fresh look at dispute resolution.180 With regard to tax, authorities across the world face various disputes with taxpayers due to differences in the interpretation or application of tax law.181 Susskind182 describes key attributes such as fairness of process and judiciousness of outcome. Social justice means different things to different people, depending on their biases, perspectives or research interests.183 Tran-Nam and

Walpole184 discuss “Tax justice” or “tax fairness” – where the term “tax” is broadly defined to include both taxes and transfers. The significance of tax justice is abundantly apparent in view of the fact that taxation is one of the most important –and most common – relationships between a citizen and the government.185

Natural law theory is undoubtedly inspired by two ideas: that of a universal order governing all men, and that of the inalienable rights of the Individual.186 It will be the purpose of this paper to show the influence of natural law upon the procedures for resolving tax disputes in

Namibia. This school of thought was selected because it is not only concerned with conflicts of interest; it also requires that a decision maker be impartial and free of bias.187 Its very purpose

178 Ury, W. U. Brett, J. M. Goldberg, S.B. 1993. Getting Disputes Resolved. Cambridge Massachusetts: Harvard Law School. 179 Dunlop, J. T. 1984, Dispute Resolution-Negotiation and Consensus Building, Dover, Massachusetts: Auburn House. 180 Ibid. 181 Thuronyi (2013). 182 Susskind, L. Cruishank, J. 1987. Breaking the Impasse: Consensual Approaches to Resolving Disputes. New York, NY: Basic Books. 183 Tran-Nam, B. Walpole, M. 2012. “Independent Tax Dispute Resolution and Social Justice in Australia”. UNSW Law Journal. Vol. 35 (2):43. 184 Ibid. 185 Thuronyi (2013). 186 Donnelly, J. 1980. “Natural Law and Right in Aquinas' Political Thought”. The Western Political Quarterly. Vol. 33 (4):520-535. Available at https://www.jstor.org/stable/448069?seq=1#metadata_info_tab_contents; last accessed 7 September 2018. 187 Ibid.

31 to enable the individual to secure justice, even against government.188 A sound system of administrative law is one which seeks to subject the action of the State to the same standards of fairness and legality that govern the acts of private citizens.189 Notice and the opportunity to be heard are fundamental to the due process of law.190

Ury, Brett and Goldberg191 assess the efficacy of the process in terms of cost, outcome and durability of conflict resolution. The central goal in the design of a dispute system is to reduce the costs associated with dispute resolution, and these costs are measured with reference to four broad criteria: transaction costs (i.e. money, time and emotional energy expended in the dispute); satisfaction with procedures and outcomes; long-term effect of the procedures on the parties’ relationship; and recurrence of disputes.192

Dispute system design involves the design and implementation of a dispute resolution system, which can be described as a series of procedures for dealing with the stream of disputes connected to an organisation or institution, rather than the procedure to deal with an individual dispute or procedure.193 Dispute systems design also aims to prevent disputes by improving the parties’ capability to negotiate disagreements at a ‘pre-dispute’ level; that is, before such differences escalate into a dispute.194 Thuronyi195 agrees that it is imperative for the first step in the system to be a form of protest within the tax administration system, as this is the speediest and least expensive method for the taxpayer, while at the same time giving the tax administration the opportunity to review its decision and correct possible mistakes.

188 Wolf (2012:98-187). 189 Baxter, L. 1984. Administrative Law Kenwyn: JUTA p 587. 190 Schwartz, B.1953. “Administrative Procedure and Natural Law”. 28 Notre Dame L. Rev. 169 (1953). Available at: http://scholarship.law.nd.edu/ndlr/vol28/iss2/1 accessed on 23 April 2018 191 Ury et al (1993). 192 Mookhey, S. 2013. “The use of discretions in taxation: the case of VAT in Bangladesh” Tax Dispute System Design, eJournal of Tax Research, Vol.11:79-96. 193 Ibid. 194 Wolski, B. 1998. “The Model Dispute Resolution Procedure for Australian Workplace Agreements: A Dispute Systems Design Perspective”. Bond Law Review. Vol.10 (1):1-13. 195 Thuronyi (2013).

Jone196 outlines the three inter-related theoretical propositions which are said to underpin dispute systems design:

1) The first proposition is that dispute resolution procedures can be characterised

according to whether they are primarily interests-based, rights-based or power-

based in approach:

i. Interests-based approaches focus on the underlying interests or needs of the

parties, with the aim of producing solutions that satisfy as many of those

interests as possible.

ii. Rights-based approaches involve a determination of which party is correct

according to some independent and objective standard.

iii. Power-based approaches are characterised by the use of power; that is, the

ability to coerce a party to do something he or she would not otherwise do.

2) The second proposition is that interests-based procedures have the potential to

be more cost-effective than rights-based procedures, which in turn may be more

cost-effective than power-based procedures.

3) The third proposition concerns the ability of a party to engage top lawyers at

exorbitant fees to plead its case, as well as to try to bring in extraneous

considerations and influence to secure a decision in its favour. The costs of

disputation may be reduced according to this third proposition by creating

systems that are ‘interests-oriented’; that is, systems which emphasise interests-

based procedures, while recognising that rights-based and power-based

procedures are necessary and desirable components.

196 Jone (2015:553-580).

The above inter-related theoretical propositions which underpin dispute systems design are important to disputants’ knowledge of the pros and cons of the relevant process.197 The choice of a particular approach depends much on the type of dispute and the kind of outcomes sought by both parties.198 Notably in tax matters, depending on the type of dispute and the profile of the taxpayer, taxpayers will often move straight to the apparently higher-cost rights-based procedures due to the belief that this will reach a definitive outcome.199 Further, taxpayers are likely to engage a professional advisor from the outset, given the complexity of tax law.200

Professional advisors’ fees, if incurred, would represent the bulk of explicit costs to taxpayers.201 It is therefore crucial that tax disputes are resolved at the administrative level as far as is possible, as the cost of more advanced stages may present a deterrent for small taxpayers to pursue tax disputes, and therefore a barrier to social justice.

1.12. Literature Review

Musonda stated that, tax can be defined as a contribution made by citizens towards the support of the state.202 In his study focusing on tax justice and poverty, it is found that taxes are central to the Government’s ability to fulfil its duties under social contract, such as the provision of public services. Such an obligation was considered by the court in Nyambirai v National Social

Security and Another,203 that “tax” or “taxation” can be understood as a compulsory contribution imposed by the legislature or another competent public authority upon the public

197 Jone (2015:553-580). 198 ibid. 199 ibid. 200 Tran-Nam (2016:320-336). 201 ibid. 202 Musonda, K. “Paper 5 of the Introduction to the Project ‘Tax Justice & Poverty’”. Principles of Taxation. Available at https://pdfs.semanticscholar.org/d350/83fc0fbee8244e4f095a8d6fc446507d52eb.pdf; last accessed 8 August 2018. 203 Nyambirai v National Social Security and Another 1996(1) SA 636 ZSC at 643C-D; 1995 (9) BLLR 1221 at 1227J1228B; Carlson Investments Share Block v Commissioner, South Africa Revenue Service 2001 (3) SA 210 WLD at 231A-B.

34 as a whole or a substantial sector thereof, the revenue from which is to be utilised for the public benefit and to provide a service in the public interest.

Due to the inherent nature of tax, disputes may occur between taxpayers and the tax authority.204 Adekeye Joseph Adeshola205 found that the occurrence of disputes in human society has been inevitable since time immemorial, and that the divergence of interests has been the cause of such disputes in different spheres of human activity. Additional findings by

Thuronyi206 suggest that tax disputes are a common feature of modern tax systems around the world, and that they occur when taxpayers disagree with the view provided by the tax administrator in respect of the taxpayer’s tax liability or entitlements and related issues.

In his study, Jone207 confirms that disagreements between the tax authority and the taxpayer may be caused by confusion as to the scope of application of a given tax law, by the ambiguity and vagueness of certain provisions of the law, or due to the taxpayer (or the tax authority) not being able to understand or correctly interpret a given legal provision when the taxpayer fails to observe the legal obligations imposed on him. Whatever the cause of such disagreements, they must be handled properly before they come to have repercussions for the economy, since taxation is a crucial component of any national economy.208 In support, Thuronyi209 opines that the tax system of a given country should be able to institute a grievance handling system which carefully and appropriately takes into consideration taxpayers’ rights.

204 Tran-Nam (2012). 205 Adeshola, A. J. 2013. “A Comparative Analysis of Trade Disputes Settlement in Nigerian Public and Private Universities”. Journal of Law, Policy and Globalisation. Vol.18. Available at https://www.iiste.org/Journals/index.php/JLPG/article/viewFile/8499/8438; last accessed 2 March 2018. 206 Thuronyi (2013). 207 Jone (2015:553-580). 208 Thuronyi (2013). 209 ibid.

Various studies have identified many benefits of designing a system for handling disputes efficiently, such as simplifying dispute processes or reducing the costs associated with dispute resolution. In order to come up with a dispute process one needs to conduct a Dispute System

Design (DSD). 210 Jone,211 found that DSD – a set of dispute resolution processes – is important to assist an organisation or institution in better managing a particular conflict or a continuous stream or series of conflicts.

A study by Susskind212 lays stress on attributes such as the fairness of the process and the judiciousness of the dispute outcome. In both of their studies, Susskind and Wolski213 summarises the central goal as being to reduce the costs associated with dispute resolution, where these costs are measured by reference to the four criteria mentioned above: transaction costs, satisfaction with procedures and outcomes, long-term effects on the parties’ relationship and the recurrence of disputes. In general, DSD involves conscious effort on the part of an organisation to channel disputes into a series of steps or options to manage conflicts.214 DSD concerns the design and implementation of a dispute resolution system that constitutes a series of procedures for handling disputes, as opposed to handling individual disputes on an ad hoc basis.215

In Wolski’s study, three types approaches to disputes solutions were studied: interest-based, rights-based and power-based approaches to dispute resolution.216 In order to settle on a particular approach, one needs to understand the approaches in context.217 Interests-based approaches focus on the underlying interests or needs of the parties, with the aim of producing

210 Jone (2015:553-580). 211 ibid. 212 Susskind (1987). 213 Wolski (1998). 214 Ury (1998). 215 Lande, J. 2007, “Principles for Policymaking About Collaborative Law and Other ADR Processes”. Ohio State Journal on Dispute Resolution Vol. 22:619-630. 216 Ury (1998). 217 Ury (1998).

36 solutions that satisfy as many of those interests as possible.218 Rights-based approaches involve a determination of which party is correct according to some independent and objective standard.219 Power-based approaches are characterised by the use of power; that is, the ability to coerce a party to do something he or she would not otherwise do.220

The second DSD proposition is that interests-based procedures have the potential to be more cost effective than rights-based procedures, which in turn may be more cost effective than power-based procedures.221 The third proposition is that the costs of disputing may be reduced by creating systems that are ‘interests-oriented’; that is, systems which emphasise interests- based procedures, but also recognise that rights-based and power-based procedures are necessary and desirable components.222

The issue of cost in tax disputes is critical when designing a dispute resolution system.223 A study by Walpole and Tran-Nam224 point out that the decision of which route the taxpayer wishes to take for resolving a tax dispute depends on three parameters; namely: the amount of tax in dispute, the costs of tax dispute resolution to the taxpayer and his or her subjective view on the probability of being successful at the administrative appeal tribunal or court.225 The study releveled that personal costs in tax matters represent a considerable barrier to accessing tax justice, and this may pose a challenge since taxpayers may be discouraged or deterred from using those forums for dispute resolution.226

218 ibid. 219 ibid. 220 ibid. 221 Wolski (1998:13). 222 ibid. 223 Tran-Nam (2016:320-336). 224 ibid. 225 ibid. 226 Tran-Nam (2012).

Tran-Nam’s study discovered that, tax justice is itself a multidimensional concept, which has two crucial elements.227 The study found that the first element is concerned with tax policy equity, meaning the distribution of tax burdens among the individuals in a society.228 The second element deals with tax procedural equity, meaning the fairness of the procedures involved in tax audits and disputes, and the perceived treatment the taxpayer receives from the tax authority.229 It is evident that the right to a fair hearing should be well protected and respected, since taxpayers form the cornerstone of the economy, the revenue gained from tax representing an essential contribution to a country’s economy.

A study by Kazimbazi commended that tax legislation should provide the right for taxpayers to engage with the tax authority whenever the taxpayer is dissatisfied with the decision made by the tax authority.230 This may in fact assist efficient and effective collection of tax by removing redundant administrative provisions and harmonising provisions in relation to respecting taxpayer rights. For example, in South Africa, the government introduced the Tax

Administration Act (TAA).231 The TAA seeks to consolidate the administrative and procedural provisions of the country’s various tax laws into a single Act.232 This was done to promote a

227 ibid. 228 Elkins, D. (2006) "Horizontal Equity as a Principle of Tax Theory". Yale Law & Policy Review. Vol. 24(1):3. Available at: http://digitalcommons.law.yale.edu/ylpr/vol24/iss1/3; last accessed 9 June 2018. 229 ibid. 230 Kasimbazi, E. 2004. “Taxpayers’ Rights and Obligations: Analysis Of Implementation And Enforcement Mechanisms In Uganda”. DIIS Working Paper no 2004/12. Available at https://www.files.ethz.ch/isn/16848/Taxpayers_Obligations_Uganda.pdf; last accessed 17 June 2018. 231 Tax Administration Act No 28 of 2011 of South Africa. 232 The Davis Tax Committee. 2017. Report on Tax Administration for the Minister of Finance. Available at http://www.taxcom.org.za/docs/20171113%20Tax%20Admin%20Report%20- %20on%20website.pdf; last accessed 7 July 2018. (The Davis Tax Committee is advisory in nature and makes recommendations to the Minister of Finance. The Minister will take into account the report and recommendations and will make any appropriate announcements as part of the normal budget and legislative processes).

38 better balance between the powers and duties of the South African Revenue Services (SARS) on the one hand, and the rights and obligations of taxpayers on the other.233

The OECD report also stated that, it is generally accepted that the taxpayer has a right to:234

(a) information which will enable the taxpayer or the taxpayer’s agent to fully comply

with tax laws;

(b) be informed of the underlying reasons concerning the decisions made by the

authority;

Appeals Tribunal;

(d) receive a written response explaining the decision of the authority regarding the

taxpayers’ objections and appeals; and

(e) pay the correct amount of taxes and duties that are legally due under the relevant

tax laws.

The above factors have an impact on how taxpayers are treated, since the government is dominant in this unequal relationship.235 In this regard, the government occupies the higher capacity, while citizens are on the receiving end.236 In taxation law, the relationship in administrative law juxtaposes the Department of Inland Revenue with the individual or legal person.237 This relationship is of a vertical nature, because it involves only two parties; i.e. the

233 Johannes, R. S. 2014. An Analysis Of The Changes Introduced By The Tax Administration Act To The Dispute Resolution Process And The Effects Thereof On The Constitutional Rights Of Taxpayers. MCom (Taxation) Thesis. University of Capetown Available at https://open.uct.ac.za/bitstream/handle/11427/8555/thesis_com_2014_com_johannes_rs.pdf? sequence=1; last accessed 3 March 2018. 234 Organisation for Economic Cooperation and Development (OECD). Committee of Fiscal Affairs Forum on Tax Administration. “Taxpayers’ Rights and Obligations – Practice Note”. Centre for Tax Policy and Administration: Tax guidance series. Available at https://www.oecd.org/tax/administration/Taxpayers'_Rights_and_Obligations- Practice_Note.pdf; last accessed 2 April 2018. 235 Baxter (1984:587). 236 Ibid. 237 Wolf (2012:98-187).

39 state organ (tax officials) and the addressee (the taxpayer), whereby tax officials can execute and enforce statutory powers conferred upon them in a hierarchical power structure.238.

However, taxpayers are also required to fulfil certain obligations, which may foster dispute avoidance or effective dispute resolution.239 The taxpayer has a responsibility to:240

(a) adhere to the objection and appeal process;

(b) heed the Authority ‘s explanation of the taxpayer’s rights of appeal

the decisions or directives under objection or appeal;

(d) provide all relevant information requested for or on behalf of the authority and that

is helpful in resolving the taxpayer’s tax dispute within a reasonable time; and

(e) engage with the authority personnel politely and with respect.

A study by Krishna maintained that, procedural due process should be continually improved and strictly controlled, with stringent timelines, subject to technical issues involving the delivery of documents.241 More importantly, guidance on the dispute resolution process may help to notify taxpayers of their rights at each stage of the dispute resolution process and provide an opportunity for rebuttal.242 It is therefore crucial that hearings are conducted at a meaningful time and in a meaningful manner.243

238 ibid. 239 Zambia Revenue Authority Brief, “Dispute Resolution Process for the Taxes and Duties Administered by the Commissioner General”. Tax Appeals Office. pp 1-12. 240 Wolf (2012:98-187). 241 Krishna, V. 2017. “Tax views: Appealing tax assessment a long and expensive journey” The Lawyer’s Daily. 242 Bateman, W. 2009. “Procedural Due Process under the Australian constitution” Sydney Law Review, Vol. 31:415-16. 243 Chemerinsky, E. 2005, Constitutional law, (2) New York: Aspen Publishers p 1020

The impact of the administration of justice within a state has practical significance for the affairs of ordinary individuals and groups.244 First, the fair administration of justice is important for the rule of law in that it ensures that state practice and policies protect against the

“infringement of the fundamental human rights to life, liberty, personal security and physical integrity of the person”.245 Second, as the main vehicle for the protection of human rights at the national level, a system for the administration of justice is necessary for the peace and stability of a state.246 The law must be accessible and, as far as possible, “intelligible, clear and predictable”.247 This includes the right of appeal and the machinery involved in exercising that right.248 Impartiality is an important element of fair hearing.249 Tribunals should be free from interference and direct influence by the government bodies in relation to which they hear appeals.250 Merely having the right to a hearing is not enough to guarantee the due process rights of taxpayers.251 Therefore, it is critical for every tax authority to offer prompt, courteous, and professional assistance in their dealings with the tax authorities, for taxpayers to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the tax authorities, and to have clear guidelines on the process of dispute resolution available through various media.252

244 Weissbrodt, D. 2009. “The Administration of Justice and Human Rights”. City University of Hong Kong Law Review. Vol. 1:23. Available at http://scholarship.law.umn.edu/faculty_articles/241; last accessed 5 May 2018. 245 ibid. 246 ibid. 247 Kaiser, A. 2011. “The Rule of Law”. European Constitutional Law Review. Vol. 7(1):511 - 516 248 Stefanelli, J. Moxham, L. 2013. “Do Our Tax Systems Meet Rule of Law Standards?” Bingham Centre Working Paper, Conference Papers. London: Bingham Centre for the Rule of Law. 249 African Commission on Human & Peoples’ Rights. “Principles And Guidelines On The Right To A Fair Trial And Legal Assistance In Africa”. Available at http://hrlibrary.umn.edu/research/ZIM%20Principles_And_G.pdf; last accessed 8 July 2018. 250 Cane, P. 2004. Administrative Law. Clarendon Law Series (4) Oxford: Oxford University Press at 389-90. 251 IFBD. 2018. “Observatory on the Protection of Taxpayers’ Rights”. 2015-2017 General Report on the Protection of Taxpayers’ Rights. Available at https://www.ibfd.org/sites/ibfd.org/files/content/pdf/OPTR_General-Report.pdf; last accessed 9 September 2018. 252 International Tax Dialogue. 2010. “Revenue Administration in Sub-Saharan Africa: An example of a Codified Set of Taxpayer’ Rights and Obligations – Slovenia”. ITD Comparative Information Series No 1.

Tax disputes may be resolved via internal or external review processes.253 The first step is to ascertain what has given rise to the differences between the taxpayer’s position and the outcome reached by the tax authority.254 A taxpayer is entitled to understand the basis on which an assessment has been issued.255 An understanding of the basis for the assessment may assist the taxpayer in preparing for his or her objection.

The taxpayer must lodge an objection within the time provided, although if an objection is lodged after the due date, the taxpayer may request an extension, in the case that reasonable grounds exist for the delay.256 The taxpayer has a choice as to the appropriate external review body.257 The advantage of the external review body is that it is external and independent in its judgment, unlike internal reviewers, who in most cases are the employees of the organisation that made the decision.258 Furthermore, the taxpayer may subsequently refer a negative objection decision for further hearing at a tax tribunal or tax court.259

Tax disputes can ultimately be resolved via judicial determination in order to avoid tax litigation before the courts.260 Alternative Dispute Resolution (ADR) is regarded as an umbrella term for processes other than judicial determination in which avoiding disputes at the earliest possible stage and resolving as many disputes as possible at the administrative level, consistently with protecting taxpayer rights, is recommended.261 As a result of the problem statement which this paper is addressing, the researcher argues for an improved and clear

253 Thuronyi (2013). 254 ibid. 255 Ibid. (It is generally accepted that the burden of proof lies with the taxpayer). 256 Lagler, K. 2016, “How to dispute your tax assessment available”. Independent Online South Africa. Available at https://www.iol.co.za/personal-finance/tax/how-to-dispute-your-tax- assessment-2026109; accessed 7 May 2018. 257 ibid. 258 Jone (2015:553-580). 259 Ibid. 260 National Alternative Dispute Resolution Advisory Council. 2003. “Dispute Resolution Terms”. Available at https://www.ag.gov.au/LegalSystem/AlternateDisputeResolution/Documents/NADRAC%20Pu blications/Dispute%20Resolution%20Terms.PDF; last accessed 9 July 2018. 261 Thuronyi (2013).

42 dispute resolution process that is independent of government, with simple procedural rules that are adaptable and flexible in consideration of taxpayers’ rights to a fair hearing within a reasonable time. It is therefore crucial to outline the chapters of the study as follow below:

1.13 Chapters of this Study

Chapter 1: provides an introduction and describes the aims and objectives, problem

statement, significance of the study, methodology, limitation, theoretical

framework, literature, ethical considerations and structure of the study.

Chapter 2: considers the origin and historical background of taxation in Namibia.

Chapter 3: discusses the Namibian tax system, how disputes arise and issues relating to how

disputes are resolved.

Chapter 4: discusses the concept of fair hearing within a reasonable time with regard to tax

matters.

Chapter 5: provides a comparative analysis on how tax dispute procedures can be improved.

Chapter 6: provides the conclusion and recommendations to improve the processes for

resolving tax disputes within a reasonable time in Namibia, in respect of the

taxpayers’ right to a fair hearing.

1.14. Conclusion

This chapter has introduced the study and the importance of taxation to any national economy.262 Although it is inevitable that disagreements between the taxpayer and the receiver

262 Ibid.

43 of revenue will occur,263 it remains important to consider the taxpayer’s right to a fair hearing without undue delays – the first step in ensuring that the taxpayer’s rights are upheld in tax disputes. This chapter has presented the aims, objectives, problem statement, significance and theoretical framework of this study. This chapter has also given a brief description of the research methodology and design, which is a qualitative content analysis of published and unpublished relevant tax articles and court cases. Finally, this chapter concluded with an outline of the thesis structure. In the next chapter, the historical background and origin of taxation is explored. Taxation problems date back to the earliest recorded history, and it remains therefore crucial to understand how disputes can be handled smoothly in today’ modern world.264

1.15. Ethical Considerations Clause

This work constitutes an example of pure desk-top research, in which all primary and secondary sources used will be referenced. As such, no individual or group interviews or questionnaires will be used as instruments of research, with no discussions being held concerning any topics or issues that might be sensitive, embarrassing or upsetting. No criminal or other disclosures requiring legal action or having potential adverse effects, risk or hazards for research participants will be made in respect of this study. There is therefore no need for arrangements to be made in respect of insurance and/or indemnity to meet the potential legal liability of the

University of Namibia for harm to participants arising from the conduct of this research.

263 Thuronyi (2013). 264 Taxworld. 2006. A History of Taxation. Available at www.taxworld.org/History/TaxHistory.htm; last accessed 10 June 2018. Taxes are considered a problem by everyone. Not surprisingly, taxation problems date back to earliest recorded history.

CHAPTER 2: Historical Background of this Study

2.1. Introduction

The previous chapter introduced the problem statement and the structure of this study. Due to the fact that the topic is under researched, it is not clear on how tax disputes were handled during the colonial administration. It is apparent that prior to independence, Namibian taxpayers had little protection from fiscal legislation or the decisions, actions or conduct of the

Receiver of Revenue.265 Having argued in the previous chapter the significance of this study in closing the existing knowledge gap in authoritative tax literature in Namibia, it is crucial to unpack the historical background of taxation in general and, more specifically, the basis of taxation and how it has evolved in Namibia. This chapter will discuss the tax system pre- and post-independence in Namibia.

The history of taxation stretches thousands of years into the past, and the basis of taxation is nearly as old as human society.266 Taxes were levied by several ancient civilisations, including the Greeks and the Romans, imposed on citizens in order to pay for military expenses and other public services.267 The word ‘tax’ first appeared in the English language only in the 14th century. It derives from the Latin taxare, which means ‘to assess’.268 Before that, the related word ‘task’, derived from Old French, was used in English. For a while, ‘task’ and ‘tax’ were both in common use, the first relating to labour; the second, money. It appears to assume that

265 Wolf (2012:98-187). 266 Mankiw, N. G. Weinzierl, M. Yagan, D. 2009. Optimal Taxation in Theory and Practice. Available at https://scholar.harvard.edu/files/mankiw/files/optimal_taxation_in_theory.pdf; last accessed 9 June 2018. 267 World Taxation. 2018. “Taxes in Ancient Greece”. Inter-American Centre of Tax Administrations. Available at www.worldtaxation.com/uncategorized/historyoftaxation.html; last accessed on 26 June 2018. 268 New Internationalist. 2008. A short history of taxation. Available at https://newint.org/features/2008/10/01/tax-history; last accessed 5 September 2018.

45 because of the likely link between taxes paid and benefits received, payroll taxes are sometimes called “contributions”.

Taxation policies developed quickly during the colonial period, as wealth began to flow into

Europe from colonies in Africa, Asia and the Americas.269 This might be true because after the colonial period, institutional settings such as tax authorities emerged and developed rapidly. However, the roots of taxation in Africa began long before colonialism arrived.270

Historical records show that many once-powerful empires or kingdoms that existed in Africa had a tax system that supported or enabled these kingdoms to expand.271 During the colonial period, colonial rulers introduced a number of tax laws in order to raise financial resources to run their colonial territories.272 Post-independence, African States inherited the fiscal institutions established by previous colonial administrations.273 One could argue that the old tax laws do still exist or that the tax systems are based on modification of the colonial systems and not responding efficiently to taxpayer’s rights.

2.2. Tax Post-Independence

The history of taxation in Namibia is notoriously under researched.274 It is hard to argue that the Namibian tax system is based on modifications of the system of taxation that already existed

269 Mehta, K. 2017. Social justice, tax justice and transparency. Available at http://www.taxjustice.uk/tax-takes-5.html; last ccessed on 7 April 2018. 270 Kabinga, M. “Paper 4 of the Introduction to the Project ‘Tax Justice & Poverty’”. Concepts and Context of the Project= Simplified Version. Available at https://www.taxjustice-and- poverty.org/fileadmin/Dateien/Taxjustice_and_Poverty/Introduction/04b_Concepts___context _simplified.pdf; last accessed 9 October 2018. 271 ibid. 272 ibid. 273 Gardner, L. A. 2012. Taxing Colonial Africa: The Political Economy of British Imperialism. Oxford: Oxford University Press. 274 Melber, H. 2000. “Economic and Social Transformation in the Process of Colonisation: Society and State Before and During German Rule”. In Keulder, C (Ed.) State, Society and Democracy. Windhoek: Konrad Adenauer Stiftung.

46 in South West Africa.275 During colonial rule, the payment of hut tax was imposed on most black adults living in the Old Location area of Windhoek, excluding married women.276 The

Old Location refers to what had been the South West African capital’s main location for the majority of black and so-called ‘Coloured’ people from the early 20th century until 1960.277

As a result, laws were tightened up and the hut tax was doubled, negatively affecting Africans’ mobility; a tax was imposed on visitors to the location and the issue of travel passes – necessary in order to leave Windhoek – was banned to those in arrears with their taxes.278

It is apparent that before independence, taxation was utilised as a weapon to stimulate labour availability for white landowners.279 In the early years of South African colonialism in

Namibia, strange taxes – such as a wheel tax, a dog tax and ‘dipping fees’ – were implemented and enforced.280 Accordingly, one may argue that such taxes were levied more to oppress the natives than to supplement the state budget.

Moore281 submits that in the early years of South African rule, taxes became an important way to coerce black Namibians to work on white owned farms, confirming that many taxes were not about state revenue. Through this strategy, many Africans obtained tax exemption certificates by agreeing to provide a determined amount of labour to a white landowner.282 In most cases, it would appear that two months’ work was adequate.283 It appears to assume that,

275 Rakner (2002:4-6). 276 Wallace, M. Kinahan, J. 2011. A History of Namibia. From the Beginning to 1990. London: Hurst Publishers. 277 Melber, H. (2016:3) 278 Henning, M. 2016. “Revisiting the Windhoek Old Location”. BAB Working Paper No 3 https://www.researchgate.net/publication/309415200_Revisiting_the_Windhoek_Old_Locatio n; last accessed 9 October 2019. 279 Hobson, J. A. 1902. Imperialism: A Study. Available at http://files.libertyfund.org/files/127/0052_Bk.pdf; last accessed 13 July 2018. 280 Moore, B. C. 2016. “Know the History: Stock Theft and Taxes in Namibia”. The Namibian. 281 Moore, B. C. 2016. “Know the History: Stock Theft and Taxes in Namibia”. The Namibian. 282 ibid. 283 ibid.

47 such an arrangement have been a major means of legally avoiding tax payments, and black citizens were eager to work for the white oppressor.

For example, Namibians with more than ten cattle or fifty small livestock were also granted a tax exemption certificate.284 According to Wolfang,285 many black Namibians were distancing themselves from wage labour. It appears to assume that, stock theft was a way to gain self- sufficiency; stealing enough sheep that they could qualify for a ‘labour exemption certificate’ was a crucial way to avoid becoming dependent on abusive white employers.286

From this perspective, the meaning of taxation developed to imply something wearisome or challenging.287 From 1901, taxation began to be weighed against income. 288 It was necessary to tax Africans in proportion to the services rendered and the benefits bestowed upon them by the administrators.289 This means that remuneration was subject to tax. The collection of

African taxes was the responsibility of the Native Affairs Department, but where staffing was inadequate, the responsibility was assumed by the Magistrates and officials of the

Constabulary.290 It is not clear on how the lower court dealt with the tax disputes.

Questionable methods were regularly employed to extract taxes from Africans, and several

African youths who were working on farms were arrested because they had not paid taxes.291

Prominent amongst their grievances was taxation.292 In absence of objection and appeal platforms, one is content to argue that, taxes on Africans were frequently applied to dispossess

284 ibid. 285 Wolf (2012:98-187). 286 Moore, B. C. 2016. “Know the History: Stock Theft and Taxes in Namibia”. The Namibian. 287 ibid. 288 Hobson (1902). 289 Moore (2016). 290 Matthews, E. L. Swift, G. M. Hartog, G. Bayley, C. 1919. Journal of Comparative Legislation and International Law Third Series, Vol. 1 (2): 103-136. 291 ibid. 292 ibid.

Africans of their land, force them to work and drive them into insurrection, which would ultimately lead to their complete domination by white capitalist society.

2.3 Tax Upon and After Independence

Upon gaining independence, Namibia adopted a Constitution, which forms the supreme law of the nation, and thereby ushered in the principle of constitutional supremacy and a system of governance based on the principles of constitutionalism, the rule of law, and respect for the human rights of the individual.293 This means that the Constitution confers taxpayers with numerous rights which serve as the substantive limitations to the government’s power to tax.

Taxes are imposed by the legislative power.294 Moreover, the constitution provides for the protection of human rights, including the rights of taxpayers. Particularly, Article 12 provides for fair hearing and places a positive duty on the tax authority to ensure that taxpayers are given a fair public hearing by an independent and impartial tribunal established by law within a reasonable time. Furthermore, the constitution provides for administrative justice under Article

18. Article 18 provides that “Administrative Justice Administrative bodies and administrative officials shall act fairly and reasonably and comply with the requirements imposed upon such bodies and officials by common law and any relevant legislation, and persons aggrieved by the exercise of such acts and decisions shall have the right to seek redress before a competent

Court or Tribunal”. This means that, taxpayers are therefore, entitled to lawful tax

293 Article 1(1) of the Namibian Constitution states that “The Republic of Namibia is hereby established as a sovereign, secular, democratic and unitary State founded upon the principles of democracy, the rule of law and justice for all”. This means that the authority of any organ of State shall be based on a source of law. 294 Section 5 read with section 83 of the Income Tax Act provide for the levying of normal tax and recovery of taxes for the benefit of the State Revenue Fund and transfer of a part thereof to the revenue funds or representative authorities. Section 2 of the Income Tax Act provide for the administration of the Act that “The Minister shall be responsible for carrying out the provision of this Act.”

49 administrative action reasonably and they expect the Receiver of Revenue officials to conform to the tax law and be transparent. Having said that, it is the underlying objectives of this research that the significance of tax justice and the fairness of the procedures involved in the tax system, disputes, and the perceived treatment the taxpayer receives from the tax authority must be upheld as provided for by the Constitution.

The Namibian tax system is source based.295 This means that income derived from an outside source does not constitute “gross income”, is not deemed income, and is therefore not subject to income tax in Namibia. Although the Income Tax Act No 24 of 1981 does not explicitly define what a source is, the concept has been taken to mean an origin of income.296 There may thus be circumstances in which the provisions of the double taxation agreement may take precedence over the Income Tax Act.297 As such, the taxing rights may be allocated to a country of resident for example.

There is no doubt that tax revenue helps to deliver social services and fulfil some of the country’s financial obligations.298 The Income Tax Act provide for direct and indirect tax to be paid into the State Account. 299 Direct taxes (income taxes) are those taxes levied on income earned and paid into the fiscus by each individual taxpayer, while indirect taxes comprise taxes

295 Gross Income is defined in section 1 of the Income Tax Act No 24 of 1981 in relation to any year or period of assessment, means, in the case of any person, “the total income, in cash or otherwise, received by or accrued to or in favour of such person, during such year or period of assessment from a source within or deemed to be within Namibia, excluding receipts or accruals of a capital nature...” 296 Stack, E. M. Grenville, D. Poole, R. Harnett, H. & Horn, E. 2015. “Commissioner for Inland Revenue v Lever Brothers and Unilever Ltd: A practical problem of source.” Southern African Business Review. Vol. 19 (1):7. 297 For example, Namibia currently has Eleven (11) Double Taxation Agreements with Botswana, France, Germany, India, Malaysia, Mauritius, Romania, Russian Federation, South Africa, Sweden and The United Kingdom. Many of these agreements were concluded in the 1990’s and need to be renegotiated to fit the current trade and tax rates. 298 Schlettwein, C. 2017/18 Budget Statement. Available at www.mof.gov.na; last accessed 14 December 2018. 299 Section 5 read with section 83 of the Income Tax Act provide for the levying of normal tax and recovery of taxes for the benefit of the State Revenue Fund and transfer of a part thereof to the revenue funds or representative authorities. Section 2 of the Income Tax Act provide for the administration of the Act that “The Minister shall be responsible for carrying out the provision of this Act.”

50 payable on goods and services bought by taxpayers and paid to the fiscus by the service provider.300 One is content to argue that tax matter, and the Namibian Government seeks to collect revenue through a mixture of direct and indirect taxes.

In deciding on a mix of direct and indirect taxation, the Government should adhere to the canons of taxation.301 This is beneficial to protect both the taxpayer’s and the government’s interests. As previously discussed above, Adam Smith302 introduced the canons of taxation – equity, certainty, convenience, economy, productivity, elasticity, flexibility, simplicity and diversity – which represent the characteristics of a good tax system. In the context of this study, tax should exist to create benefits for society, not to be a burden upon it.303

2.4. Conclusion

It has been observed that the payment of tax is not new.304 Taxes have been levied since time immemorial, dating back to ancient civilisations such as the Greeks and Romans.305 In Africa, tax policies were introduced during the colonial era as weapons to stimulate labour in a form of oppression.306 It is not clear and unreported on whether the natives were given a right to object and appeal to decisions of the oppressor.307 The chapter revealed that, the tax system did not change much due to the fact that upon gaining independence, most African States inherited the fiscal institutions established by previous colonial administrations. 308 Although this act has been amended to keep up with new developments in taxation, it is argued that the

300 Thuronyi (2003). 301 Smith, A. Canons/Principles of Taxation. Available at http://economicsconcepts.com/canons_of_taxation.htm; last accessed 13 May 2018. 302 ibid. 303 Tax Policy Center. Marron, D. B. Morris, A. C. 2016. How Should Governments Use Revenue From Corrective Taxes? Available at https://www.brookings.edu/wp- content/uploads/2016/07/How-Should-Governments-Use-Revenue-from-Corrective-Taxes- Marron-Morris-1.pdf; last accessed 9 July 2018. 304 Mankiw (2009). 305 World Taxation (2018). 306 Kabinga (2016:21-23). 307 Melber (2016:3). 308 Gardner (2012).

51 tax system is still based on modifications of the colonial system of taxation that previously existed in South West Africa.309 For example, the provisions related to objections and appeals have not been amended (to be aligned with international best practices and modern tax administration) to improve on how dispute procedures can consider taxpayers’ right to a fair hearing within a reasonable time. The next chapter will present and point out issues relating to how disputes are resolved as it is currently practiced under the Namibian Income Tax Act.

309 Rakner (2002:3-5).

CHAPTER 3: Tax Dispute Resolution in Namibia

3.1. Introduction

In the last chapter, the tax system pre- and post-independence in Namibia was presented. It established in chapter 2 that, the provisions related to tax dispute resolution were not amended to improve on how tax qualms can be addressed in the spirit of Article 12 of the Namibian

Constitution. In this chapter, issues relating to Namibia’s tax dispute resolution procedures will be examined. The first step in answering the research question depends on unlocking the issues identified in each of the dispute settlement avenues made available to taxpayers.

3.2. Tax Dispute Settlement Avenues

When the taxpayer is not in agreement with the amount of tax to be paid, or any other decision made in relation to his or her tax status, the Income tax act makes provision for him or her to object to that assessment or decision.310 This part of the relationship between the taxpayer and the tax authority tends to be contentious, because under the existing process, according to section 67 of the Income Tax Act,311 the taxpayer is allowed to determine the amount of tax payable and to thereafter submit this to the authority to confirm or deny the assessment. This would attest to the fact that, due to varying assessments of tax owed to the state, difference in the interpretation of the law by the tax authority and the taxpayers and disputes over expenses disallowed, it is usually at this stage that the assessments of the two parties differ and a dispute arises.

Having said that, one agrees that it is a best practice for taxpayers to have a first opportunity to resolve such disputes within the tax administration itself because it is regarded as the cheapest

310 Section 71(1) of the Income Tax Act No 24 of 1981 provides that “ Objections to any assessment made under this Act may be made within 90 days after the date of the issue of the notice of assessment, in the manner and under the terms prescribed by this Act by any taxpayer who is aggrieved by any assessment in which he or she has any interest.” 311 Section 67 of the Income Tax No 24 of 1981 provides for the examination of return and assessment of a return and computation of a taxpayer’s liability for tax furnished

53 way of settling tax disputes.312 Section 71313 of the Income Tax Act, 1981 and Section 28314 of the VAT Act, 2000 make provision for taxpayers to object to an assessment or appeal against the decision of the minister within a prescribed time and manner if the taxpayer does not agree with the tax assessment or the decision of the Minister.315 The Namibia Inland Revenue

Department has an objective review committee that reviews and allows or disallows such objections.316 In terms of the tax dispute design system expressed by Ury, Brett and Goldberg study in Chapter 1,317 one may regard this option as an interests-based avenue because the appeal is made within the tax administration, whereby the tax administration is given the opportunity to review its decision and correct possible mistakes.318 Accordingly, one may agree that, interests‐ based bargaining may offer significant benefits to organisations that adopt this approach when negotiating collective agreements, including improved relationships between the tax authority and taxpayers by providing longer-term solutions to problems and issues.319

312 Thuronyi (2013). 313 Section 71 of the Income Tax Act No 24 of 1981 provides that “Objections to any assessment made under this Act may be made within 90 days after the date of the issue of the notice of assessment, in the manner and under the terms prescribed by this Act by any taxpayer who is aggrieved by any assessment in which he or she has any interest.” 314 Section 27 of the VAT Act No. 10 of 2000 provides that “Any person who is dissatisfied with an appealable decision may lodge an objection to the appealable decision with the Commissioner within 90 days after the date of issue of the notice of the decision or assessment in question or within such extended period as the Commissioner may allow on good cause shown in writing.” 315 After the objection application has failed, the taxpayer is entitled to make an appeal to the tax tribunal or special court for hearing income tax and VAT appeals and to High Court if the taxpayer is not satisfied with the ruling issued by the Special Court. Section 28(2) of the VAT Act 10 of 2000, provides that, a person dissatisfied with an objection decision may, within 60 days after the person was served with a notice of the objection decision, lodge with the Commissioner a notice of appeal to the Special Court for hearing income tax appeals constituted under section 73 of the Income Tax Act, 1981 or a tax tribunal constituted under section 73A of that Act. Section 73(1) of the Income Tax Act No 24 of 1981, provides that, any person entitled to make an objection who is dissatisfied with any decision of the Minister as notified to him or her in terms of section 71(4) may, subject to the provisions of section 73A, appeal therefrom to a special court for hearing income tax appeals, constituted in accordance with the provisions of this section. 316 Nyanga (2016:32). 317 Ury (1998). 318 Ury (1998). 319 ibid.

As a second avenue of appeal, the taxpayer may appeal to the Tax Tribunal – an informal court

– to hear income tax and value added tax cases established under the terms of section 73A(2)320 of the Income Tax Act. Again, in terms of the tax dispute design system expressed by Ury,

Brett and Goldberg study in Chapter 1,321 one may regard this option as a rights-based avenue.

It differs from the first avenue and one appreciate that because it involves making a determination on which party is correct according to some independent and objective standard whereby an independent person is appointed to hear both sides of the argument.

In the third case, the taxpayer may opt to appeal to the special court for hearing income and value added tax cases, established under the terms of section 73(1)322 of the Income Tax Act.

The special court is a more formal court and one may view this avenue as both a rights-based and a power-based avenue, first because it involves a determination of which party is correct according to some independent and objective standard, with a judge, assisted by appointed members for specific information, appointed to hear both sides of the argument.323 On the other hand, this option may also be characterised by the use of power as expressed by Ury, Brett and

Goldberg study, whereby the taxpayer who can afford the costs and pay a tax lawyer to research and prepare their case will be able to improve their chances of success.324 In the context of this study, one way to improve the procedures for resolving tax disputes is streamlined the procedures to afford the requisite degree of flexibility to the extent that the taxpayer can make

320 Section 73A(2) of the Income Tax Act provides that “A tribunal to be known as the tax tribunal is hereby established for the hearing of any appeal referred to in subsection (1).” 321 Ury (1998). 322 Section 73(1) of the Income Tax provides that “Any person entitled to make an objection who is dissatisfied with any decision of the Minister as notified to him or her in terms of section 71(4) may, subject to the provisions of section 73A, appeal thereform to a special court for hearing income tax appeals, constituted in accordance with the provisions of this section.” 323 Ury (1998). 324 ibid.

55 an informed choice of which procedures to use (as the taxpayers have the burden of proof in tax disputes) to reach a definitive outcome based on the rule of law.325

Having said that, tax disputes, if not otherwise settled, will ultimately end up in one court of law or another.326 After first protesting to the tax administration or to one of the quasi-judicial committees, the taxpayer can still disagree with the result, in which case the taxpayer can resort to making an appeal before the courts.327 For example, the regular courts of Namibia follow the formal court process.328 These courts can involve either one or two levels, meaning that the first judicial decision can, if necessary, be further appealed in the second judicial process.329

Here, the taxpayer may represent him or herself, or can be represented in court by a legal representative or any other person with the necessary power of attorney granted by the taxpayer concerned.330

Typically, those taxpayers who take such cases to court tend to be large companies represented by skilled and experienced advocates who are comfortable with formal court procedures, conducting research and preparing arguments to strengthen their case.331 Accordingly, one may agree that, this is the final step in the appeals procedure, and can be regarded as a power-based avenue according to Ury, Brett and Goldberg’s classification, with parties using power to confront each other in the court of law.

325 Drumbl, M. L. 2016. “Beyond polemics: Poverty, taxes, and noncompliance”. eJournal of Tax Research. Vol. 14 (2):253-290. 326 Carte Blance Marketing CC and Others v Commissioner for the South African Revenue Service Case No. 26244/2015 9. 327 Thuronyi (2013). 328 Amoo, S. K. The structure of the Namibian judicial system and its relevance for an independent judiciary. Available at http://www.kas.de/upload/auslandshomepages/namibia/Independence_Judiciary/; last accessed 9 June 2018. 329 ibid. 330 SARS. 2012. External Policy Dispute Administration. Available at https://juta.co.za/law/media/filestore/2012/11/4_GEN-DISP-02-POL01_- _Dispute_Administration_-_External_Policy1.pdf; last accessed on 03 July 2018. 331 Thuronyi (2013).

3.3. Issues Relating to Namibia’s Tax Dispute Resolution Procedures

It follows that, Namibia, similarly to other developing countries such as South Africa,

Botswana, and Zimbabwe, recognises the fact that tax dispute resolution is an integral part of tax administration.332 Notably, it is not only the taxpayer that has a substantial interest in an efficient and fair tax appeal system; the tax authority also has a particular interest in possessing a system that:333

i. is accepted as independent by all stakeholders, ensuring that the operation of the

forums is established to check government action, and should be free from

interference or direct influence by the government bodies from which they hear

appeals, in order to satisfy the important element of granting a fair hearing;

ii. has procedures that are as simple as possible but are also adaptable enough to deal

efficiently with appeals of varying importance and complexity;

iii. minimises delays; and

iv. by use of transparent procedures, ensures that identical issues are not appealed

unnecessarily by different taxpayers.

One major advantage of the above criteria is that they ensure that protection and respect are granted to taxpayers’ rights, since there will be a dispute resolution system – a wholly independent court – governing the revenue appeal, which recognises the importance of tax

332 Dabla-Norris, E. Misch, F. Cleary, D. Khwaja, M. 2017. “Tax Administration and Firm Performance: New Data and Evidence for Emerging Market and Developing Economies”. IMF Working Paper No. 17/95. Available at https://www.imf.org/~/media/Files/Publications/WP/2017/wp1795.ashx; last accessed 12 October 2018. 333 UN-ATAF. 2017. Workshop on Transfer Pricing Administrative Aspects and Recent Developments, Dispute Avoidance and Resolution. Swaziland. Available at https://ec.europa.eu/taxation_customs/sites/taxation/files/docs/body/transfer_pricing_dev_cou ntries.pdf; last accessed 27 May 2018.

57 appeals and the rights of the taxpayer to be heard within a reasonable time.334 One is content to argue that a robust dispute system which allows both taxpayers and the tax authority to resolve their differences within a reasonable time is likely to be of great benefit for a country like Namibia.

In deliberating on the objectives of this research, it is important to pay some further attention to the issues relating to each dispute avenue currently available under Namibia’s tax dispute resolution procedures:

(a) Assessments

As mentioned, it is here that tension exists between the taxpayer and the Receiver of Revenue as to the amount of tax to be paid or expenses to be allowed. It is observed that tax assessments in Namibia are routinely not sent out on time, thus making it difficult for the taxpayer to have a clear picture of his tax liability in order to effectively object to an assessment.335 Thuronyi336 suggests that, after making a timely tax assessment, the tax authority should send notice of the tax assessment to the taxpayer to notify him of his obligations. Given the above, the taxpayer would then be able to file objection on time. The resulting consequence is that the tax authority may, in such an instance, issue a default determination, as the taxpayer’s allotted time to object may have elapsed.337

In some instances, certain taxpayers may be notified about their tax status through their representatives, but this comes at a cost and, unfortunately, not all taxpayers can afford this.338

One tends to believe that the taxpayer may choose not to pursue valid disputes.

334 Thuronyi (2013). 335 Nyanga (2016:32). 336 ibid. 337 ibid. 338 Thuronyi (2013).

58 where an objector is dissatisfied with the outcome of an objection person s aggrieved by the exercise of such acts and decisions shall have the right to seek redress before a competent

Court or Tribunal

(b) Objection

Section 27 of the VAT Act and Section 71 of the Income Tax Act provide for the time and manner of lodging objections. This means that, an aggrieved taxpayer has the right to object to a decision of the tax authority. However, these laws do not provide a timeframe for the objection decision to be delivered to the taxpayer.339 The act is not clear as to how the review committee is formed, its procedures or sitting arrangements. However, they do provide that an objection can be lodged with the minister and the commissioner within a period of 90 days.

One could argue that it is within the power of the commissioner to appoint the members of the review committee, who will then determine the procedures thereof.

Although the Income Tax Act is silent on who shall constitute the review committee, in order to enjoy a certain level of autonomy, the committee is expected to be distinct from the tax assessors or inspectorate.340 It follows that the membership of the Inland Revenue Department review committee includes officials from head office operations and the legal unit, but excludes any officials responsible for auditing.341 It would therefore be fair to argue that the members of the review committee are employees of the tax authority.342

It emerged through the Tax Administration Diagnostic Assessment Tool (TADAT) report that the supervisor of the audit team is also a member of the penalty waiver committee.343 According

339 Section 27 of the VAT Act and section 71 of the Income Tax only provides for the manner and time to lodge an objection but not for the time the Receiver of Revenue will take to provide the decision. 340 Nyanga (2016:32-35). 341 ibid. 342 ibid. 343 Ibid.

59 to the TADAT report, taxpayers themselves are not represented in any way on the committee.344 It should be stressed that the committee will review decisions based on the taxpayer’s objection submission, and will not necessarily engage any further with the taxpayer to inform him or her of the committee’s position before issuing the final objection decision to the taxpayer. It is therefore worrisome that, the taxpayer will then be forced to move to the next level to address matters that could instead have been finalised at this earlier level.345 One tends to believe that, it is unavoidable that the committee may at times be partial, since the law does not indicate how its membership shall be composed. It is, however, doubtful whether the objection decision can be achieved without hindrances to the taxpayer’s right to be heard.

Furthermore, there is no time limit provided in the law for the review committee to render its decision.346 In practice, the time taken to decide on a given case is dependent on the complexity of the case.347 In the absence of a time limit, the taxpayer may have to wait for a decision until the matter is finalised by the tax authority. 348 Even if the tax authority needs time to deal carefully with tax cases, in order to protect the basic rights of the taxpayer against arbitrariness on the part of the committee, there is a need to impose a maximum legal time limit.349

Accordingly, one may agree that, if there is no legal limit, this may compromise the committee’s ability to deliver its decisions within reasonable time, which may in turn affect the right of the taxpayer to be heard.

344 Ibid. 345 ibid. 346 ibid. 347 Luskin, M. L. Luskin, R. C. 1986. “Why So Fast, Why So Slow: Explaining Case Processing Time”. Journal of Criminal Law and Criminology. Vol. 77 (1). Availale at https://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?referer=https://www.goog le.co.uk/&httpsredir=1&article=6512&context=jclc; last accessed 19 August 2018. 348 ibid. 349 Wheelwright, K. (1997) "Taxpayers' Rights in Australia". Revenue Law Journal. Vol. 7 (1):10. Available at: http://epublications.bond.edu.au/rlj/vol7/iss1/10; last accessed on 22 November 2018.

It is apparent that, the law needs to provide procedures which are to be followed to reduce arbitrariness in the actions of the review committee.350 This matter because, it will thus be easier for the taxpayer to challenge the procedure followed by the committee if they believe there are any inconsistencies. At present, the review procedures are not documented.351 One may therefore doubt whether the committee will render a reasoned decision, since the procedures for resolving tax disputes are not known by the taxpayer, thus denying him the opportunity to challenge it.

Namibia is a signatory to the Millennium Declaration, and aspires to embrace the principles of the inclusive information society as advocated in the world summit on the information society, whereby everyone can create, access, utilise and share information and knowledge, enabling individuals and communities to achieve their full potential, thereby improving their own quality of life.352 The country’s e-governance policy was driven through the Presidential Economic blueprint – Harambee Prosperity Plan – as a way of bringing the Government closer to the people and to also of cutting out the bureaucratic bungling which characterises most public institutions when it comes to information dissemination.353 It can be concluded that, embracing development such as e-governance may be of assistance in resolving tax disputes timely.

The Namibian Government is well aware of its crucial role in sustaining the right environment for the development of a true information society in Namibia through the use of Information

Communications Technology (ICT). However, as a developing country, Namibia is lagging far

350 Whitton, H. 2001. “‘Implementing Effective Ethics Standards In Government And The Civil Service’” Transparency International. Available at https://www.oecd.org/mena/governance/35521740.pdf; last accessed 22 December 2018. 351 Thuronyi (2013). 352 Government of the Republic of Namibia. 2005. The Namibia E-governance Public Policy. Available at http://www.opm.gov.na/documents/108506/113906/2E- Governance_Policy_Final.pdf/9904df6f-eecc-4653-81fd-f134e0b23f9b; last accessed 9 June 2018. 353 Harambe Prosperity Plan 2016/17 – 2019/20. The Namibian Government Action Plan towards prosperity for all. Available at http://www.gov.na/documents/10181/264466/HPP+page+70- 71.pdf/bc958f46-8f06-4c48-9307-773f242c9338; last accessed 2 December 2018.

61 behind industrial countries like Australia, South Africa and the United Kingdom when it comes to internet usage.354 For example, objections relating to issues other than the provision of records and the submission of statutory documents are centralised and dealt with at the Head

Office.355 This means that taxpayers can submit their objections at any regional office, which will then be forwarded to the Head office for consideration. It is therefore crucial that, this area could be improved upon to reduce the drawn-out bureaucratic procedures which characterise service delivery in many public institutions.

Appeals to the tax tribunal must comply with Section 73A (1) of the Income Tax Act, which provides that “any appeal referred to in section 73(1) shall in the first instances be heard by a tax tribunal established by subsection (2) where –

 the amount of tax in dispute does not exceed such amount which the Minister may from

time to time fix by notice in the Gazette, or having regard to any assessed loss which

may be carried forward, will probably not in total exceed such amount; or

 the Commissioner and the appellant agree thereto; or

 no objection to the jurisdiction of the tribunal to hear the appeal is made at or before

the commencement of the hearing of the appeal: Provided that where the

Commissioner, at any time before the hearing of such appeal, or the chairperson of the

tribunal, at any time before or during the hearing of such appeal, is of the opinion that

354 UN. 2008. E-Government Survey 2008 from E-government to connected governance: Economic & Social affairs. Available at https://publicadministration.un.org/egovkb/portals/egovkb/documents/un/2008- survey/unpan028607.pdf; last accessed 25 July 2018. 355 Ministry of Finance Press Release on Centralisation of Objections to Tax Assessments. Available at www.mof.gov.na/.../Press_Release_Centralization_of_Objections_To_Tax_Assessment; last accessed 27 July 2018.

on the ground of the disputes or legal principles arising or that may arise out of such

appeal, the appeal should rather be heard by the special court..”

It is unclear whether the gazette referred to in Section 73A(1)(a) does exist, and if so, how often it is amended.356 One would expect the category of tax amount to the tax tribunal to be made clear to the taxpayer.

Although the act makes provision for the hearing of tax appeals, it does not provide a timeframe to set down such appeals. Section 73A(4)(a) of the Income Tax Act empowers the Minister of

Finance, in consultation with the Judge-President of the High Court, to appoint legal practitioners to a panel from which the chairperson of the tax tribunal357 is to be selected to hear income tax and VAT appeals. As the selection is made, a taxpayer who requests a hearing may doubt whether the review will be independent, because the taxpayer must send the request for a hearing to the Receiver of Revenue – the same office demanding payment, and which is in control of establishing the tax tribunal and the special court.358 One is tempted to argue that the right to a speedier hearing may be compromised with unnecessary delays.

It is likely that hearings may be unreasonably delayed due to logistical arrangements in organising the tax tribunal, such as the stipulation that the legal practitioners involved must be in good standing with their own taxes for their names to gazetted to be eligible for

356 Wolf (2012:98-187). 357 The tax tribunal is an informal dispute settlement court for hearing income tax and VAT appeals, established under section 73A(2) of the Income Tax Act. 358 Wolf (2012:98-187).

63 appointment.359 While waiting for a hearing, the taxpayer is expected to pay the tax due.360

Accordingly, one may agree that, the taxpayer may therefore be tempted to withdraw the case and just pay, which will in turn have an impact on the interpretation and simplification of tax law needed to build up the Namibian tax literature, which is insufficient at present.361

There is no doubt that, a tax tribunal is meant to be an independent body comprised of legal tax practitioners, completely distinct from the control of state authority, which issues the assessment or decision.362 Although the Income Tax Act provides for the appointment of legal practitioners to a panel from which the chairperson of the tax tribunal is to be selected, it is not clear on what grounds these legal practitioners are appointed.363 Having the appointment grounds in place may foster in the selection of the panel for the tax tribunal, as well as in other aspects of the administration of tax laws, which is critical to giving taxpayers a fair hearing on tax matters.364 It is doubtful whether access to the courts and fair hearing in Namibia can be guaranteed under these circumstances.

359 In terms of section 73A(4)(a) of the Income Tax Act, the Minister of Finance is empowered to appoint legal practitioners to a panel from which the chairperson of the tax tribunal is to be selected and the persons so appointed shall hold office for five years from the date of the relevant notice. In terms of section 73(2) of the Income Tax Act, the Special Income Tax Court shall consist of a judge of the High Court of Namibia, an accountant of not less than 10 years standing and a representative of the commercial community. An additional member from mining sector may be selected to serve as a member of the special court on the preference of the appellant. The law requires that a member from the mining sector should be a qualified engineer. 360 Section 78 of the Income Tax Act provides that “The obligation to pay and the right to receive and recover any tax chargeable under this Act shall not, unless the Minister so directs, be suspended by any appeal or pending the decision of a court of law under section 76, but if any assessment is altered on appeal or in conformity with any such decision a due adjustment shall be made, amounts paid in excess being refunded with interest at the rate of fifteen per cent per annum calculated from the date proved to the satisfaction of the Minister to be the date on which such excess was received and amounts short-paid being recoverable with interest calculated as provided in section 79: Provided that where such date falls before 1 March 1985 the interest payable for the period from such date to 28 February 1985 shall be calculated at the rate of seven and a half per cent.” 361 Wolf (2012:98-187). 362 Griswold, E. N. 1994. “The Need for a Court of Tax Appeals,” University of California Hastings Scholarship Repository. Vol. 1:54-56. 363 Section 73A(4)(a) of the Income Tax Act does not provide the requirements for the appointment of the legal practitioners. 364 Olumide K. 2015. “An assessment of the Nigerian Tax Appeal Tribunal and the need for a speedier and more efficient system”. Research Journal of Finance and Accounting. Vol. 6.

Although the Income Tax Act makes provision for the establishment of the tax tribunal, it does not suggest that this should be a permanent tribunal or tax court, whereby the aggrieved taxpayer can be heard at a reasonable time.365 It follows that, appeals to the tax tribunal are heard once the chairperson of the tribunal is appointed.366 There are often complicated logistical problems and bureaucratic delays in the establishment of the tax tribunal.367 One could content that, this is a problem to do with the fact that tax dispute forums are not permanent and, as such, create unfair procedures and unreasonable lengthy periods of delay.

Consequently, such slow processes in affording the taxpayer an opportunity to be heard not only frustrate taxpayers, but also delay the enforcement of laws, which has an adverse effect on the right of the taxpayer to a fair hearing.368 It would therefore be fair to conclude that, such a situation can be perceived as prejudicial towards the taxpayer’s right to a fair hearing within a reasonable time.369

365 Section 73(5)(a) of the Income Tax Act provides for the appointment of the members of any such court other than judges to be appointed by the Minister by notice in the Gazette, and shall hold office for five years from the date of the relevant notice: Provided that the appointment of any such member may at any time be terminated by the Minister for any reason which the Minister considers good and sufficient, and shall lapse in the event of the abolition of the court in terms of subsection (3). 366 In terms of section 73A(4)(a) of the Income Tax Act, the Minister of Finance is empowered to appoint legal practitioners to a panel from which the chairperson of the tax tribunal is to be selected and the persons so appointed shall hold office for five years from the date of the relevant notice. In terms of section 73(2) of the Income Tax Act, the Special Income Tax Court shall consist of a judge of the High Court of Namibia, an accountant of not less than 10 years standing and a representative of the commercial community. An additional member from mining sector may be selected to serve as a member of the special court on the preference of the appellant. The law requires that a member from the mining sector should be a qualified engineer. 367 G v The Ministry of Finance Inland Revenue Directorate (unreported case). In the Income Tax Tribunal, delivered on 17 November 2010. 368 Wolf (2012:98-187). 369 The right provided for in Article 12 of the Namibian Constitution. Article 12 of the Namibian constitution provides that “In the determination of their civil rights and obligations or any criminal charges against them, all persons shall be entitled to a fair and public hearing by an independent, impartial and competent Court or Tribunal established by law: provided that such Court or Tribunal may exclude the press and/or the public from all or any part of the trial for reasons of morals, the public order or national security, as is necessary in a democratic society.”

(d) Special Court

The special court is established in terms of Section 73(1)370 of the Income Tax Act. Although the act makes provision for the hearing of tax appeals, it does not provide a timeframe required to set down such appeals. As discussed earlier, having a timeline creates a corresponding obligation, whereby the tax authority is obliged to act within a certain timeframe, so as not to violate the rights of the taxpayer. In the absence of the above, one tends to believe that delays are prompt to occur.

It follows that, the minister is empowered to appoint the members371 to the Special Income Tax

Court372 and to request the Judge President to nominate and second a Judge or an Acting Judge to be the President of said court.373 Although the special income tax court is constituted through the Ministry of Justice, the process of requesting the hearing, verifying tax obligations and appointing the members (an accountant, an official from the business community and an official from the mining community) depends heavily on the Ministry of Finance.374 Hence, this may indicate that there is no separation of powers between the executive and the judiciary, since the constitution of the aforesaid forum is partially in the hands of the Ministry of

Finance.375 It appears to assume that, due to the fact that the Ministry of Finance is in charge

370 Section 73(1) of the Income Tax provides that “Any person entitled to make an objection who is dissatisfied with any decision of the Minister as notified to him or her in terms of section 71(4) may, subject to the provisions of section 73A, appeal therefrom to a special court for hearing income tax appeals, constituted in accordance with the provisions of this section.” 371 In terms of section 73(2) of the Income Tax Act, the Special Income Tax Court shall consist of a Judge of the High Court of Namibia, an accountant of not less than 10 years standing and a representative of the commercial community and an additional member who should be a qualified engineer from the Mining sector. 372 The Special Income Tax Court is an independent and impartial court established to deal with disputed tax cases. 373 In terms of Section 73(6) of the Income Tax Act No 24 of 1981, the Judge-President of the High Court shall nominate and second a Judge or an Acting Judge to the Special Court for hearing Income Tax and VAT appeals to be the President of such court, and such secondment shall be for such period or for the hearing of such cases as the Judge-President shall determine. 374 G v The Ministry of Finance Inland Revenue Directorate (unreported case). In the Income Tax Tribunal, delivered on 17 November 2010. 375 Wolf (2012:98-187).

66 of government’s fiscal policies, for a semblance of neutrality and independence of such a forum it would be more appropriate for members be chosen by, for example, the Ministry of Justice.376

Although the Income Tax Act makes provision for the establishment of the special court, it does not suggest that it should be a permanent court, whereby the aggrieved taxpayer could be heard within a reasonable time.377 Appeals to the special court are heard once the court has been successfully established.378 It is noted that, even once the members have been appointed, upon the request by the taxpayer, the taxpayer’s file must first be forwarded to the Government

Attorney in order for the attorney to be appointed to act on behalf of the Ministry of Finance.379

Such a lack of permanence may create backlog of objection and appeals pending finalisation.

It follows that, the appointed attorney will then first familiarise himself/herself with the case, in consultation with Ministry of Finance officials. The matter will then be registered with the

Registrar of the High Court, depending on the available hearing dates. Interestingly, the process is complicated and may create logistical problems and bureaucratic delays in finalising the matter.380 Once the matter is out of the Ministry of Finance’s hands, it is up to the Government

Attorney and the Registrar of the High Court to determine the hearing date. Taken together, the above may create problems due to the tax dispute forums not being permanent and, as such, create unfair procedures and unreasonably lengthy periods of delay.

By observing the above, one could be content that such slow processes in affording the taxpayer an opportunity to be heard do not only frustrate the taxpayer, but also delay the enforcement of

376 ibid. 377 Section 73A(3) of the Income Tax provides that the Minister may, by notice in the Gazette, constitute such court or courts, and may from time to time by such notice abolish any existing court or courts or constitute such additional courts as circumstances may require. 378 Section 73A(4)(a) of the Income Tax Act provides for the court to be fully established which requires the appointment of members and for their names to be gazetted. 379 Nyanga (2016:32-33). 380 G v The Ministry of Finance Inland Revenue Directorate (unreported case). In the Income Tax Tribunal, delivered on 17 November 2010.

67 the law, which has an adverse consequence on the right of the taxpayer to a fair hearing.381

Thus, such a forum may be perceived to be prejudicial towards the taxpayer’s right to a fair hearing within a reasonable time.

(e) Regular Court(s)

After protesting to the tax administration or to the quasi-judicial committees, the taxpayer may still disagree with the result, in which case the taxpayer can bring an appeal before the courts.382

However, the right of the dissatisfied taxpayer to challenge the decision is limited to the procedure prescribed in Part VIII of the Income Tax Act.383 This means that, a dissatisfied taxpayer in Namibia thus cannot challenge a decision by means of an application for review or a declaratory claim, as is the case in South Africa.384 Under South African legislation for example, an objection and appeal procedure is created, but the jurisdiction of the High Court is, pertinently, not excluded.385 In Namibia, the taxpayer must first exhaust the procedure prescribed in Part VIII of the Income Tax Act.386 The problem with this process is that, until the objection and appeal procedures referred to above are met, the aggrieved party has to wait

381 Wolf (2012:98-187). 382 Thuronyi (2013). 383 The taxpayer must first exhaust internal remedies: Stuttafords Namibia (Pty) Ltd v Commissioner of Inland Revenue (HC-MD-CIV-CON-2017- 01798) [2018] NAHCMD 203 (4 July 2018). 384 ibid.

385 South African Institute of Chartered Accountants (SAICA). 2015. Jurisdiction of the Tax Court. Issue 191. Available at https://www.saica.co.za/integritax/2015/2440._Jurisdiction_of_the_Tax_Court.htm; last accessed 17 July 2018. 386 Gideon Jacobus du Preez v Minister of Finance Case No: SA 20/2011. In this case, it was contested on question of whether this dispute should have been pursued in the Special Income Tax Court, Counsel for the appellant argued that the calculation of interest was a decision that could not be the subject of an objection within the meaning of section 71. Counsel argued that since the interest levied on the overdue payments is charged after the assessment has been made the appellant‟s complaint does not fall within the purview of section 73(1) and could not be dealt with by the Special Income Tax Court which deals with assessments.

68 for the chance to be heard, which may exceed the reasonable time within which to be heard as confirmed in Article 12 of the Namibian Constitution.

3.4. Conclusion

This chapter has revealed issues to do with how tax disputes are resolved in Namibia. Primary among these are the logistical hurdles involved in appointing court members, the lack of timelines for resolving tax disputes and the delays that make it costly and difficult, if not impossible, for the taxpayer to be heard, all of which have adverse consequence on the right of the taxpayer to a fair hearing.

It starts with the relationship between the taxpayer and the tax authority that can often be contentious because of differences between the taxpayer’s tax return or assessment and the tax authority’s final decision on the assessment.387 However, the taxpayer is entitled by law to object and appeal against the decision of the Receiver of Revenue.388 This means that, the taxpayer can make use of the existing appeal platforms. The chapter revealed how the existing procedures followed in these platforms are cumbersome, in that the hearings often do not take place within a reasonable time as set out in Article 12 of the Namibian Constitution.389 The key arguments emanate from the fact that when assessments are not sent out to the taxpayer on time, this makes it difficult for the taxpayer to effectively object to the assessment.390

Moreover, such objections are also not reviewed on time, as the Income Tax Act does not provide a timelines within which the tax authority must respond to objections and appeals.391

Furthermore, there are no permanent tribunals or courts established to hear taxpayer grievances

387 Thuronyi (2013). 388 Section 71(1) of the Income Tax Act No 24 of 1981 provides that “Objections to any assessment made under this Act may be made within 90 days after the date of the issue of the notice of assessment, in the manner and under the terms prescribed by this Act by any taxpayer who is aggrieved by any assessment in which he or she has any interest.” 389 Nyanga (2016:32-33). 390 ibid. 391 ibid.

69 when disputes arise.392 This is because the Income Tax Act requires a tax tribunal or court to be fully established for a hearing to take place.393 This will only happen if the members of such tribunals or courts are appointed by the Minister in consultation with the Judge and their names are gazetted after showing that they are in good standing with their taxes.394 All of this makes it extremely likely that the fair hearing confirmed in Article 12 of the Namibian Constitution will be unreasonably delayed due to the logistical arrangements involved in constituting such tribunals or courts.

The prospects would surely be achieved if the tax tribunal or special court are permanent established and that the law stipulates definitive time limits for the tax authority and for the review committee to provide timeous decisions, to indicate who specifically should be the members of the review committee/tribunal/special court, since the composition of such forums will have a direct effect on the decisions rendered, and to provide the procedures to be followed by such bodies or forums while deliberating cases, in order to reduce arbitrariness.395 Through emphasising logistical bureaucracy, the next chapter will discuss how the problems highlighted here may impact the right of the taxpayer to a fair hearing within a reasonable time.

392 Section 73A(3) of the Income Tax provides that the Minister may, by notice in the Gazette, constitute such court or courts, and may from time to time by such notice abolish any existing court or courts or constitute such additional courts as circumstances may require. 393 Section 73A(4)(a) of the Income Tax Act provides for the court to be fully established which requires the appointment of members and for their names to be gazetted. 394 Section 73(5)(a) of the Income Tax Act provides for the appointment of the members of any such court other than judges to be appointed by the Minister by notice in the Gazette, and shall hold office for five years from the date of the relevant notice: Provided that the appointment of any such member may at any time be terminated by the Minister for any reason which the Minister considers good and sufficient, and shall lapse in the event of the abolition of the court in terms of subsection (3). 395 Croome, B. J. 2008. Taxpayers Rights in South Africa: An analysis and evaluation of the extent to which the powers of the South African Revenue Service comply with the Constitutional rights to property, privacy, administrative justice, access to information and access to courts. PhD Thesis. University Of Cape Town. Available at https://open.uct.ac.za/bitstream/handle/11427/4594/thesis_law_2008_croome_bj.pdf?sequen ce=1; last accessed 19 October 2018.

CHAPTER 4: Fair Hearing Within a Reasonable Time in Tax Matters

4.1. Introduction

The last chapter examined the issues relating to tax dispute resolution procedures and the delays that make it difficult and costly for a taxpayer to be heard. Unpacking these issues further,

Chapter 4 discusses the links between what constitutes a ‘fair’ hearing and the rule of law as the founding value of our constitutional democracy, safeguarding the taxpayer’s right to obtain a hearing within a reasonable time. This chapter focuses on how delays in hearing tax matters may impact the right of the taxpayer to a fair hearing within a reasonable time as per the principles of administrative law.

There is no doubt that the right to a fair hearing is enshrined in Article 12 of the Namibian

Constitution.396 However, what makes a trial or hearing ‘fair’ constitutes a fine balance created from a wide variety of rights and duties, which is in principle unique in each individual case.397

Accordingly, one may agree that, the concept of a fair hearing lies at the heart of the audi alteram partem principle,398 which requires individuals to be afforded a proper hearing.

In taxation, the Receiver of Revenue is under an obligation to inform the taxpayer of the assessment amount and what has given rise to that amount, to afford the taxpayer a decision on any objection with a reasonable time and, subsequently, to an appeal hearing within a

396 Article 12(1)(a) of the Namibian Constitution provides that “In the determination of their civil rights and obligations or any criminal charges against them, all persons shall be entitled to a fair and public hearing by an independent, impartial and competent Court or Tribunal established by law: provided that such Court or Tribunal may exclude the press and/or the public from all or any part of the trial for reasons of morals, the public order or national security, as is necessary in a democratic society.” 397 Dimeji, I. 2016. Fair Hearing and Its Importance in the Administration of Justice in Nigeria, available at http://www.lawyard.ng/fair-hearing-and-its-importance-in-the-administration-of- justice-in-nigeria-by-ikuforij/ last accessed at 12 March 2018. 398 Peach, V. L. 2003. The Application of the audi alteram partem rule to the proceedings of Commissions Of Inquiry. LLM Thesis. Potchefstroomse University. Available at http://dspace.nwu.ac.za/bitstream/handle/10394/58/peach_vl.pdf?sequence=1; last accessed 8 November 2018.

71 reasonable time.399 Furthermore, the authority deciding on the matter should be free from bias in the administration of justice: “nemo judex in re sua”400 – “no one should be a judge in his own cause”. Importantly, the aforementioned principles establish that administrative powers which affect the rights of individuals must be exercised in accordance with natural justice. One tends to believe that, taxation procedures, as they are currently practiced, constitute administrative action taken by the executive branch of government, and should therefore be exercised in accordance with natural justice.401 Accordingly, any inconsistency in the legal procedures of taxation with the provisions of the Constitution shall not prevail.402

4.2. Fair Hearing

The principle of fair hearing applies to both criminal trials and civil matters, such as tax disputes. In the Namibian Constitution, this right is enshrined in Article 12. The right to a fair trial in the determination of all persons' civil rights and obligations or any criminal charges against them is guaranteed under this article. Thus, the essential elements of a fair hearing must be adhered to, namely:403

1) Easy access to court

2) The right to be heard (audi alterem partem rule)

399 Article 12(1)(a) of the Namibian Constitution provides that “In the determination of their civil rights and obligations or any criminal charges against them, all persons shall be entitled to a fair and public hearing by an independent, impartial and competent Court or Tribunal established by law. 400 Singh, A. R. 2012. Legal Maxim. Available at https://ctconline.org/documents/legal/11.10.12%20Ajay%20Singh%20Material%20SG%20Me eting%20Legal_Maxim[1].pdf; last accessed 20 April 2018. Singh states that, “Natural justice is an important concept in administrative law: (1) Audi alteram partem means no one should be condemned unheard; and nemo judex in re sua means no one should be made a judge in his own cause or the rule against bias.” 401 Section 2 read with section 3 of the Income Tax Act provides for the administration of the Act that the Minister shall be responsible for carrying out the provisions of this Act. 402 Chaune v Ditshabue (A 5/2011) [2013] NAHCMD 111 (22 April 2013). 403 Dimeji, I. 2016. Fair Hearing and Its Importance in the Administration of Justice in Nigeria, available at http://www.lawyard.ng/fair-hearing-and-its-importance-in-the-administration-of- justice-in-nigeria-by-ikuforij/ last accessed at 12 March 2018.

3) Impartiality of the adjudicating process

4) The principles of Nemo judex in causa sua

5) No inordinate delays in delivering judgement.

The above elements are important because they represent the concepts of justice and injustice.404 As previously discussed, what makes a trial or hearing fair is precisely the proper balance of a wide variety of rights and duties, which, as mentioned, is in principle unique in every single case.405 Therefore, what constitutes a ‘fair’ hearing will depend on the facts of the case at hand, and requires the weighing of a number of public interest factors, including the rights of all parties.406

One seeks guidance from case law. In the unfair dismissal case of Gamatham v Norcross SA

(Pty) Ltd t/a Tile Africa407, the court argued that the employee’s right to a fair hearing does not necessarily mean that an employer’s failure to offer an employee the opportunity for an internal appeal hearing in itself justifies finding that that the dismissal was procedurally unfair. The court held that an arbitrator who is tasked with the duty to determine a dispute concerning alleged unfair disciplinary action or unfair dismissal must deliver a finding on whether or not the employer had a valid and fair reason for the disciplinary action and whether a fair procedure was followed in imposing the disciplinary sanction.

Fair procedure real matter, and if the arbitrator finds that there was no valid or fair reason for the disciplinary sanction, or that the process followed was unfair, the arbitrator must uphold the challenge of unfair labour practice or unfair dismissal. However, if, on the other hand, the

404 Kalven Jr. H. Blum, W. J. 1973. "The Anatomy of Justice in Taxation". University of Chicago Law Occasional Paper. No. 7:9-11. 405 Padjen, I. L. 1996. “Fairness as an Essential of law”. Hrčak Portal. Vol. XXXIII (5):108—119 406 Namibia Development Corporation v Aussenkehr Farms (Pty) Ltd 2010 (2) NR 703 at 718 C- D. 407 Gamatham v Norcross SA (Pty) Ltd t/a Tile Africa (LCA 62/2013) [2017] NALCMD 27 (14 August 2017).

73 arbitrator finds that there was a valid and fair reason for the disciplinary sanction and that fair procedures were followed in imposing the disciplinary action, the arbitrator must dismiss the complaint.408 One would expect the same to apply in tax matters.

A further element of the right to a fair hearing relates to the character of the court or tribunal before which the hearing takes place.409 This was discussed in Hlophe v Constitutional Court of South Africa and Others.410 In this case, a complaint was brought that the Judge President of the Cape High Court, Judge John Hlophe, had approached some of the judges of the

Constitutional Court in an improper attempt to influence that court's pending judgment in one or more cases. This complaint was submitted by the judges of the Constitutional Court to the

Judicial Services Commission, as the constitutionally appointed body for dealing with complaints of judicial misconduct. The court argued that any attempt to influence this or any other court outside the limits of proper court proceedings not only violates the specific provisions of the Constitution regarding the role and function of the courts, but also threatens the administration of justice in the country and indeed the democratic nature of the state. The judgment held that the court – and indeed all courts in South Africa – would not yield to or tolerate unconstitutional, illegal and inappropriate attempts to undermine their independence or impartiality.411 It is therefore crucial that, Judges and other judicial officers must continue

– to the very best of their ability – to adjudicate all matters before them in accordance with the oaths or solemn affirmations they have taken, guided only by the Constitution and the law.

Drawing on such authority, the judgement in Hlophe v Constitutional Court of South Africa and Others highlights the institutional design and structure of the court or tribunal such as to

408 Gamatham v Norcross SA (Pty) Ltd t/a Tile Africa at 40-43. 409 Brown v Stott 2001 2 WLR 817; Fitt v United Kingdom 2000 II Eur Court HR 367 44. 410 Hlophe v Constitutional Court of South Africa and Others 08/22932) [2008] ZAGPHC 289 (25 September 2008). 411 Hlophe v Constitutional Court of South Africa and Others at 23.

74 maintain the independence of the institution and its individual members from government, and to maintain the capacity of the judiciary or tribunal members to act impartially. In the context of this study, one way to maintain the independence, is to have a separate body or committee, acting independently of the tax administration both in appearance and in fact.

The requirement of independence also means that courts and tribunals should have control over internal procedural matters, such as allocating cases to be heard by particular judges or tribunal members and control over court or tribunal listings.412 One may agree that, this is relevant in that the public – and taxpayers in particular – can therefore have confidence that their cases will be decided fairly and in accordance with the law.

The requirement of impartiality means that proceedings must be free from bias and the objective perception of bias.413 There is no doubt that, the presence of independent and impartial adjudication will help the system to guarantee the protection of the fundamental rights and liberties of the people against the executive and legislative branches of government.414 One may consider the possibility that something as seemingly straightforward as the mode of appointment of members or judges to such forums and the structure of the tribunal/court system may help to foster impartiality and independence.

412 Bentley, D. 1996. Problem Resolution: Does The ATO Approach Really Work? Available at http://classic.austlii.edu.au/au/journals/RevenueLawJl/1996/3.pdf; last accessed on 14 August 2018. 413 Axen v Germany 1984 72 Eur Court HR (ser A) at 25-26. Available at http://humanrights.vgso.vic.gov.au/charter-guide/charter-rights-by-section/section-24-fair- hearing; last accessed 20 October 2018. 414 Bangamwabo, F. X. 2008. “The right to an independent and impartial tribunal: A comparative study of the Namibian judiciary and international judges”. In Horn, N & Bösl (Eds). The independence of the judiciary in Namibia, Windhoek: Macmillan Education Namibia.

4.2.1. Audi alterem partem and nemo judex in causa sua

The rule of law is a founding value of our constitutional democracy.415 Bingham416 describes the principle that “the law must be accessible and, so far as possible, intelligible, clear and predictable”. This includes the right of appeal and the machinery involved in exercising that right.417 One could argue that, it requires effective enforcement of laws and, in so doing, safeguards a taxpayer’s right to challenge a tax assessment or decision and get a fair hearing.418

Binh and Walpole419 state that the process should be based on an established legal framework which is known and understood by taxpayers, easily accessible, guarantees transparent independent decision-making, and resolves disputed matters in a timely manner.420 It is therefore recommended that, minimising unnecessary delays could help to improve enforcement and enhance the overall rule of law.

It is apparent that, the concept of a fair hearing lies at the heart of the audi alteram partem principle,421 which is made up of a number of core components or requirements.422 Among

415 Article 1(1) of the Namibian Constitution provides that, “The Republic of Namibia is hereby established as a sovereign, secular, democratic and unitary State founded upon the principles of democracy, the rule of law and justice for all.” 416 Kaiser, A. (2011). Rule of law. European Constitutional Law Review 7(3), 511-516. 417 Organization for Economic Cooperation and Development. 2017. “Report for the G20 Finance Minister.” Tax Certainty. Accessed at https://www.oecd.org/tax/tax-policy/tax-certainty-report- oecd-imf-report-g20-finance-ministers-march-2017.pdf; last accessed 18 October 2018. 418 Gribnau, H. 2013. “Equality, Legal Certainty and Tax Legislation in the Netherlands Fundamental Legal Principles as Checks on Legislative Power: A Case Study”. Utrecht Law Review. Vol. 9 (2). Available at https://www.utrechtlawreview.org/articles/10.18352/ulr.227/galley/222/download/; last accessed 12 April 2018. When upholding the rule of law, tax authorities are thus required not only to have regard to the strict terms of regulatory provisions but so too to the values underlying the Bill of Rights. 419 Tran-Nam (2012). 420 Nyanga (2016:32). 421 Manyika, G. K. 2016. The Rule Of Law, The Principle Of Legality And The Right To Procedural Fairness: A Critical Analysis Of The Jurisprudence Of The Constitutional Court Of South Africa. Masters Thesis. University of KwaZulu-Natal. 422 The requirements for a fair hearing are set out in section 3 and section 4 of the PAJA as follow: “In order to give effect to the right to procedurally fair administrative action, an administrator, subject to subsection (4), must give a person referred to in subsection (1): (i) adequate notice of the nature and purpose of the proposed administrative action, (ii) a reasonable opportunity to make representations; (iii) a clear statement of the administrative action; (iv) adequate notice of any right of review or internal appeal, where applicable; and (v) adequate notice of the right to request reasons in terms of section 5.”

76 these are adequate notice of intended action, reasonable and timeous attendance, personal attendance, legal representation and the right to lead and convert evidence, as well as the exclusion of bias.423 It must be borne in mind that, the above components allow individuals to be afforded a proper hearing.

In taxation matters, the Receiver of Revenue is under an obligation to inform the taxpayer of the assessment amount and how that amount was arrived at, to afford the taxpayer a decision on any objection with a reasonable time and, subsequently, to an appeal hearing within a reasonable time.424 Not complying to the above, may be contrary to Article 18 of the Namibian

Constitution.

The “audi alteram partem” rule is flexible, and its application will depend on the circumstances of each case; the particular circumstances of the case may or may not significantly attenuate its operation. In the unreported case of G v The Ministry of Finance Inland Revenue

Directorate425, the applicant complained about the long delay in his case and what he perceived to be prejudicial and unfair treatment meted out at the hands of the Respondent. It is fair to agree with the ruling issued by the presiding officer held that the obligation placed on the

Receiver of Revenue had not been complied with, and that the right of the applicant to a timely determination of his tax liabilities had been infringed.

In the case of Augar Invstms OU v Min of Enviroment & Anor426 it was proposed that the

Minister had declared the disputed land as wetland and did not observe the rules of natural justice in issuing General Notice 313/2012. In this case, reasonable steps were not taken to ensure that every person whose interests were likely to be affected was given adequate

423 Hoexter (2012:369-378). 424 Both the objection and appeal under the Income Tax Act and VAT Act. 425 G v The Ministry of Finance Inland Revenue Directorate (2010). 426 Augar Investments OU v Min of Environment & Another (HC 1017/14) [2015] ZWHHC 278 (25 March 2015).

77 opportunity to obtain representation in the matter. The applicant sought to have the notice set aside, primarily because the rules of natural justice were not observed, the applicant being a party affected by the notice. The court ruled that the rules of natural justice were flagrantly flouted in the sense that the Minister did not observe the rules of natural justice to a fair representation.427

There is no doubt that the aim of natural justice is to secure justice, to prevent miscarriages of justice and to give protection to the public against judicial arbitrariness. In Hikumwah v

Nelumbu and others,428 the decision made by the first appellant in her capacity as ‘chief’ of the

Oukwanyama Traditional Authority was challenged by way of review in the High Court on the basis that it was made without the respondents being afforded a hearing, contrary to Article 18 of the Constitution. The court a quo held that the respondents were not informed of the charges that they would face or the true nature of the forum at which they were to appear, which only later was established to be disciplinary in nature and were not afforded ample time for preparation before appearing before the investigation committee.

In view of the above examples of case law, one can be certain that the principles of natural justice have been developed and followed by the judiciary in order to protect the right of the public against the arbitrariness of the administrative authorities. This does reinforce the foundation of natural justice, which implies fairness, reasonableness, equity and equality.

427 The notice was invalid on ground of not complying with Section 113(1) read with section 136 of Environmental Management Act, which provides that “In the exercise of any function in terms of this Act, the Minister, the Secretary, the Agency, the Director-General and any other person or authority shall ensure that the rules commonly known as the rules of natural justice are duly observed and, in particular, shall take all reasonable steps to ensure that every person whose interests are likely to be affected by the exercise of the function is given an adequate opportunity to make representation in the matter. 428 Hikumwah v Nelumbu (A 15/2012) [2015] NAHCMD 111 (13 May 2015).

4.2.2. Nemo judex in re sua: Judge in your own cause

Another aspect of ensuring a fair trial is that the authority deciding the matter should be free from bias in the administration of justice. The famous maxim “nemo judex in re sua”429 means

“no one should be a judge in his own cause”. The aforementioned principles establish that administrative powers which affect the rights of any individual must be exercised in accordance with natural justice. One is content to agree that, the Constitution shall always prevail in the case of any contradiction with other law.430

For example, in the case of Shafuda v S431, the appellant appealed against the refusal of a magistrate to recuse himself from criminal proceedings. The appellant was the chief clerk of court, with two of the state witnesses being a magistrate and his wife, who was a senior clerk at the magistrate’s court in Oshakati. The presiding magistrate in this matter was from another district. He admitted the facts, which caused the appellant to form a suspicion that the magistrate would be biased. The magistrate refused to recuse himself and did not apply the test for recusal. The court held the view that justice would not be served if the presiding magistrate continued to hear this case, and the magistrate was ordered to recuse himself from the case. It is apparent that, the test for recusal is based on the reasonableness of the applicant and on the perception of bias by the Judicial Officer.432

Segments of the above have been referred to in Lameck v The State,433 wherein the question of recusal by a judicial officer was confirmed to be a constitutional matter that goes to the root of a litigant’s entitlement to a fair trial before an impartial court. The said doctrine requires a

429 Singh (2012). Singh states that, “Natural justice is an important concept in administrative law: (1) Audi alteram partem means no one should be condemned unheard; and nemo judex in re sua means no one should be made a judge in his own cause or the rule against bias.” 430 Chaune v Ditshabue (A 5/2011) [2013] NAHCMD 111 (22 April 2013). 431 Shafuda v S (CA 10/2015) [2017] NAHCNLD 29. 432 Lameck v State (CC 15/2015) [2014] NAHCMD 85. 433 Lameck v The State at 5

79 judicial officer to recuse himself or herself from proceedings if he or she decides that it is inappropriate to hear a case in which there appears to be a bias or apparent bias. 434 In that regard, it is therefore imperative upon the judiciary to ensure that it remains independent and that it is seen to be independent of any influence that might reasonably be perceived as compromising its ability to judge a case before it fairly and impartially.435

Furthermore, the factors to be taken into account in deciding whether a judge should recuse himself on account of possible bias were discussed in Sikunda v Government of the Republic of Namibia and Another.436 The High Court expressed itself in respect of the issue of recusal as follows: “(1) there must be a suspicion that the judicial officer might, not would, be biased;

(2) the suspicion must be that of a reasonable person in the position of the accused or litigant or member of the public; (3) the suspicion must be based on reasonable and reliable grounds; and (4) one which a reasonable person would, and not might have.” Accordingly, one may agree that, the above considerations cannot be ignored when it comes to dealing with tax matters.

4.2.3. A Hearing within a Reasonable Time

It is a general principle that a hearing – in this instance, a tax hearing – should take place within a reasonable time.437 However, under Article 12(b), the Namibian Constitution does not

434 This test has stood the test of time and was ably stated in S v Smith 2012 (1) SACR 567 at 570 B-C where Plasket AJA stated: “what the test of reasonable prospects of success postulates is a dispassionate decision, based on the facts and the law, that a court of appeal could reasonably arrive at a conclusion different to that of the trial court. In order to succeed, therefore, the appellant must convince this court on proper grounds that he has prospects of success on appeal and that those prospects are not remote, but have a realistic chance of succeeding.” 435 Baxter, L. 1984. Administrative Law. Kenwyn: JUTA at 587. 436 Sikunda v Government of the Republic of Namibia Case No. A318/2000. 437 Unreported case G v The Ministry of Finance Inland Revenue Directorate (unreported case). In the Income Tax Tribunal, delivered on 17 November 2010. In the Income Tax Tribunal, the chairperson stressed that the Commissioner and the Respondent’s officials are tasked with the convening of the Tax Tribunal hearings. The fact that the Respondent was faced with logistical problems in the establishment of a Tax Tribunal or Special Court due to circumstances beyond its control should not be considered. The obligation placed on the Commissioner was not

80 specifically prescribe what constitutes a reasonable time, and as a result this has been left to the courts to determine according to the circumstances of each case. One seek guidance from case law. The concept of a reasonable time was referred to in South African Revenue Service v

Muller Marais Yekiso Inc,438 in which both the taxpayer and SARS failed to comply with the rules and to follow up on relevant matters. The court argued that the tax authority, in particular, should take the lead and display efficiency in the conduct of its hearings. Furthermore, the court should comply with specified time periods, and where it does not do so, it should promptly raise this matter in correspondence, providing reasons for the delay and seeking written agreements to extensions. In the context of this study, one may agrees that dispute resolution rules must be rigorously complied with, in order to hold the other party to the procedural timetable as laid down in the rules. As such, the procedure must not only be accessible to all taxpayers but must manifestly be seen as fair and should not unreasonably deny the taxpayer the right to a fair hearing.

As Martin Luther King, Jr.,439 said, justice delayed is justice denied.440 This adage was referred to in the case of Vaatz v Municipal Council of the Municipality of Windhoek,441 in which it was argued that justice delayed is indeed justice denied. This was due to the long period taken for the judgement to be prepared. Such untoward delay was deprecated in a judgment written under

complied with and accordingly the rights of the Appellant to a ‘speedy determination’ of his tax liabilities were infringed. 438 South African Revenue Service v Muller Marais Yekiso Inc Tax Case no. 12013/2012, pp2 and 3, of 13 February 2014. 439 Good Reads. 2013. Martin Luther King Jr. Available at https://www.goodreads.com/quotes/783541-justice-too-long-delayed-is-justice-denied; last accessed 7 July 2018. Martin Luther King, Jr., used the phrase in the form “justice too long delayed is justice denied” in his “Letter from Birmingham Jail", smuggled out of jail in 1963, ascribing it to a “distinguished jurist of yesterday.” 440 Sourdin, T. Burstyner, N. 2014. “Justice Delayed is Justice Denied”. Victoria University Law and Justice Journal 4:46-60. Available at https://www.researchgate.net/publication/304197388_Justice_Delayed_is_Justice_Denied; last accessed 9 August 2018. 441 Vaatz v Municipal Council of the Municipality of Windhoek (SA53/2011) [2016] NASC 24.

81 similar circumstances in Myaka and others v S,442 wherein the Presiding Judge, Classen J, stated that:

… it would be a sad day in the administration of justice in this country if the

lances of one member of a three bench tribunal, should cause the stiffing of the

normal appeal procedures prescribed by law…This court has a constitutional

duty to protect its processes and to ensure that parties, who in principle have the

right to approach it, should not be prevented by an unreasonable delay by a

lower court

One may agree that, the above principle is essential to maintaining order, because people tend to believe that inefficiency and delay will drain even a just judgment of its value.443 Yet, across the world, there are continued complaints that tax tribunals and courts still take too long.444

Addressing this issue may assist countries in analysing their efficiency and devising reforms that improve both timeliness and user satisfaction. It may also enable potential tribunal/court users to better estimate how long it might take to resolve their disputes – allowing them to then adjust their expectations accordingly.

Following the discussion above, it appears to assume that, there is no single international rule on how long the hearing of cases should take.445 It is apparent that each case must be considered on its own merits, and may be relatively normal, of a higher priority, or more complex.446 The

442 Myaka and Others v S (A5040/2011, 215/2005) [2012] ZAGPJHC 174 (21 September 2012). 443 Olijnyk, A. 2014. Justice and Efficiency in Mega Litigation. PhD Thesis. University of Adelaide. Available at https://digital.library.adelaide.edu.au/dspace/bitstream/2440/91442/3/02whole.pdf; last accessed 17 May 2018. 444 Harley, G. 2015. The World Bank, How long is too long? When justice delayed is justice denied. Available at http://blogs.worldbank.org/europeandcentralasia/how-long-too-long-when-justice- delayed-justice-denied; last accessed 27 April 2018. 445 Sourdin (2014:46-60). 446 ibid.

82 determination of whether there has been unreasonable delay in bringing a trial/hearing to a close depends on the circumstances of the particular case.447

In interpreting the phrase “within reasonable time” in the provision for the right to a fair trial in the European Convention for the Protection Human Rights and Fundamental Freedoms,448 the European Court of Human Rights states that the question of whether the length of criminal proceedings exceeds the limits of a reasonable time has to be decided in relation to the particular circumstances of the proceedings concerned, and in particular with regard to: (1) the complexity of the case as a whole, (2) the manner in which the case has been handled by the prosecuting authority and the courts and (3) the accused’s own conduct. These principles are acceptable and relevant in the case of tax cases.449 It would therefore be fair to argue that the time frame for hearing cases is dependent on individual country legal system and its technologies or resources to finalise tax matters.

Some courts and tribunals have developed their own working definitions of prolonged or delayed cases. In Kenya, for example, any case is considered ‘backlogged’ if it is older than 1 year.450 As discussed earlier that, there is no generally accepted rule as to how long cases should take, and each case must be considered on its own merits.451 It should be stressed that, it is therefore important for any authority to have streamlined objection or appeal processed and procedures to ensure the speedy and economical clearance of cases.

447 State v Heinz Dresselhaus & Others Case no cc 12/2005 448 European Convention on the Protection of Human Rights and Fundamental Freedoms. Available at https://www.echr.coe.int/Documents/Convention_ENG.pdf; last accessed 3 July 2018. 449 ibid. 450 Mbote, P. Akec, M. 2011. “Justice Sector and the Rule of Law”. A Review by AfriMAP and the Open Society Foundation, Johannesburg: Open Society Foundations. 451 Harley, G. 2015. How long is too long? When justice delayed is justice denied. Available at http://blogs.worldbank.org/europeandcentralasia/how-long-too-long-when-justice-delayed- justice-denied; last accessed 5 April 2018.

For example, in a criminal matter, the length of a delay in the case can be a ‘triggering mechanism’.452 If the delay is presumptively prejudicial then the court, going by the evidence on the record before it, will conduct an inquiry into the constitutionality of the delay, taking into account the factors set out in In re Mlambo 1991 (2) ZLR 339 (SC). These are:

1. The explanation and responsibility for the delay;

2. The assertion of rights by the accused person;

3. Prejudice arising from the delay; and

4. The conduct of the prosecutor and of the accused person with regard to the delay.

In civil cases, this concept is interpreted very broadly and covers private rights and obligations regardless of the law governing a particular case – civil, commercial, administrative, etc.453

One is content that, the requirement laid down in Article 12 for a hearing to be held within a reasonable time is akin to an obligation to produce a specific result.

Similarly to proportionality analysis, a review of reasonableness presses for a justification, in order to enhance the accountability of official decision makers and the transparency of their decisions.454 The court has not laid down any specific means of attaining their judgment; however, the court will set out a positive obligation whose content remains largely unspecified.455 The “reasonableness” of the length of proceedings must be assessed in the light of the circumstances of the case and with reference to the following criteria: the complexity of

452 Edel, F. 2007. The length of civil and criminal proceedings in the case law of the European court of human rights. Available at https://www.echr.coe.int/LibraryDocs/DG2/HRFILES/DG2- EN-HRFILES-16(2007).pdf; last accessed 9 April 2018. 453 ibid. 454 Government of the Republic of South Africa v Grootboom 2001 (1) SA 46 (CC). 455 Article 18 of the Namibian Constitution provides that “Administrative bodies and administrative officials shall act fairly and reasonably and comply with the requirements imposed upon such bodies and officials by common law and any relevant legislation, and persons aggrieved by the exercise of such acts and decisions shall have the right to seek redress before a competent Court or Tribunal.”

84 the case, the conduct of the applicant and of the relevant authorities and what is at stake for the applicant in the dispute.456 In addition, only delays for which the state can be held responsible can justify a finding of failure to comply with the reasonable time requirement.457

4.2.4. Tax Disputes and Administrative Law

Tax and administrative law often interact due to the nature of tax law dispute resolution.458 For example, article 1(2) of the Namibian Constitution vests all power in the people of Namibia, who exercise such power through the democratic institutions of the state.459 In the context of this paper, this means that the democratic institutions created by the State shall be the bodies through which Namibian citizens exercise their power. One may agree that, such institutions

(public bodies and authorities) should therefore be guided by certain laws and principles in the execution of their work.460 For example, appropriate legislation has to be created which will then regulate the relationship between these democratic institutions and private citizens.

With reference to Namibian citizens’ tax obligations, this relationship is regulated by the

Income Tax Act No. 24 of 1982 (hereafter referred to as the tax act).461 This act gives the state

– through the Ministry of Finance (Inland Revenue) – the power to collect taxes earned or deemed due from Namibian sources. As it represents, the Act is the national tax legislation, source of power by virtue of which officials at the Receiver of Revenue exercise their public

456 Rumpt v Germany No. 46344/06 §41, 2 September 2010. 457 Frydlender v. France [GC], 27 June 2000, §43. 458 Tax Certainty (2017). 459 Article 1(2) of the Namibian Constitution provides that “All power shall vest in the people of Namibia who shall exercise their sovereignty through the democratic institutions of the State”. 460 This also includes common law as it is a part and parcel of our law as stipulated in article 6 of the Namibian Constitution. 461 Section 5 (1) (a) of the Income Tax Act No 24 of 1981 provide that “Subject to the provisions of Schedule 2 there shall be paid annually for the benefit of the State Revenue Fund, an income tax (in this Act referred to as the normal tax) in respect of the taxable income receive...”

85 duties. It should be stressed that, such power must be exercised in accordance with the

Constitution and the law; i.e., legislation (in this instance, the tax act) and common law.462

In terms of the laws which guide public authorities, such as the tax office, in the execution of their work, administrative law is an integral feature because of the central role it plays in the system.463 Administrative law caters to the various branches of government that are involved in the national decision-making process.464 One tends to agree that, administrative law is by its very nature designed to uphold the fundamental administrative rights of the people in respect to the executive’s statutory power.

Tax law falls under the scope of areas that are governed by the principles of administrative law.465 As mentioned, in practice tax and administrative law interact quite often due to the nature of resolving tax law disputes.466 Particularly, disputes in tax law are mainly centred on tax assessments or decisions made by the tax authority.467 In Namibia, the standard practice is that tax is levied by the government and paid by the taxpayer for the benefit of the State

Revenue Fund in respect of the taxable income received by or accrued to or in favour of the taxpayer. 468 In this regard, the taxpayer is obliged by law to furnish a report of income and a

462 The organ of government tasked with the executive authority to administer, implement, regulate and collect taxes must be conferred with powers wide enough to perform its functions, but must not exceed its powers in a manner that unreasonably and unjustifiably infringes taxpayer’s fundamental rights. The doctrine of separation of powers (a South African perspective) by Judge Phineas M Mojapelo, Deputy Judge President of the Southern Gauteng High Court. Available at https://www.sabar.co.za/law-journals/2013/april/2013-april-vol026-no1-pp37- 46.pdf; last accessed 7 May 2018. 463 Burns, Y. 1999. Administrative Law under the 1996 Constitution (2) Durban: Butterworths. 464 ibid. 465 Tax Certainty (2017).

466 Wolf (2012:98-187). 467 Carlson Investments Share Block v Commissioner, South Africa Revenue Service 2001 (3) SA 210 WLD at 231A-B. 468 Section 5 (1) (a) of the Income Tax Act No 24 of 1981 provide that “Subject to the provisions of Schedule 2 there shall be paid annually for the benefit of the State Revenue Fund, an income tax (in this Act referred to as the normal tax) in respect of the taxable income receive...”

86 computation of the tax payable by completing a tax return, and to pay the tax accordingly found due in a manner prescribed by law, subject to examination by the Minister.469

Upon examination of a taxpayer’s returns and computation of liability for tax, the Minister shall issue to the taxpayer a notice of assessment.470 It is at this stage that differences may arise between the assessment of the taxpayer and the receiver of revenue’s notice of assessment. It therefore follows that, in such circumstances, the taxpayer would wish to present their case to support their assessment or query the determination of the receiver of revenue.

The tenets of administrative and common law require that, where such representation is made, the taxpayer must be accorded the right to be heard and, furthermore, to be heard timeously.471

This chapter will therefore provide an in-depth discussion as to how tax472 and administrative law interact.

Burns473 describes administrative law as a branch of public law that regulates the legal relations of public authorities, whether with private individuals and organisations or with other public authorities. One may agree to the fact that, it is widely accepted474 that administrative law overlaps to a considerable extent with constitutional law, which is also concerned with the organs of state and their interaction with citizens.

469 Section 55 of the Income Tax Act provides that “All forms of returns and other forms required for the administration of this Act shall be in such form as may be prescribed by the Minister from time to time” Taxpayer is responsible to furnish a return of income and a computation of the tax payable, and to pay the tax so payable, and the manner of furnishing returns and interim returns. 470 Section 56(1) of the Income Tax Act provides that “Subject to subsections (4), (5) and (16), every person who is personally or in a representative capacity liable to taxation under this Act in respect of a year of assessment, shall not later than the last day fixed by subsection (1A) - (a) furnish a return of income in the prescribed form...” 471 Article 12 of the Namibian Constitution guarantee fair hearing both in civil and criminal matters. 472 Definitional elements of tax law already discussed in chapter 2. 473 Burns (1999). 474 Hoexter (2012).

Constitutional law regularly surfaces in administrative contexts, shaping how agencies make decisions, the substance of those decisions, and judicial review of agency decision-making.475

There is, in fact, some evidence to suggest that, administrative law attempts to regulate the conduct of an administrator, to guard against abuses of power and to conform to the law by being transparent in its decision-making.476 However, before tax law can fully subscribe to administrative law and the principles therein, one is content to argue that, there must be complete satisfaction, first that there exists a relationship in administrative law between the taxpayer and the receiver of revenue and, second, that the receiver of revenue indeed performs an administrative action.477

4.2.4.1. Administrative Law and Administrative Action

There is no doubt that, administrative law creates the link between the decision made and the administrative action taken.478 The absence of such a link may leads to there being no relationship between the parties, in which case Article 18479 cannot be used to review the decision in question.

It is common for an unequal relationship to exist between a government and its people, with the government being dominant in this unequal relationship. In this regard, the government

475 Metzger, G. E. 2010. Ordinary Administrative Law As Constitutional Common Law. Available at https://pdfs.semanticscholar.org/94f1/b1a091fc83a0029ded6475d80ab519a15136.pdf; last accessed 20 October 2018. Constitutional law’s manifestations in administrative contexts can usefully be divided into three categories. First, ordinary administrative law provides mechanisms that are either constitutionally mandated or that avoid constitutional violations. Second, constitutional norms and concerns underlie and are evident in a number of administrative law doctrines. Third, both courts and the political branches sometimes use doctrinal mechanisms and substantive requirements to encourage agencies to take constitutional concerns seriously, with the result that constitutional concerns influence the shape of agency decision making. 476 Burns (1999). 477 Wolf (2012:98-187). 478 Baxter (1984:587). 479 Article 18 of the Namibian Constitution provides that, “Administrative bodies and administrative officials shall act fairly and reasonably and comply with the requirements imposed upon such bodies and officials by common law and any relevant legislation, and persons aggrieved by the exercise of such acts and decision shall have the right to seek redress before a competent Court or Tribunal.”

88 occupies the higher hierarchical position, while the people are on the receiving end.480 In terms of taxation law, this type of administrative legal relationship juxtaposes the Department of

Inland Revenue with an individual or legal person.481 Simply put, this relationship is of a vertical nature because it involves only two parties; i.e. the state organ (tax officials) and the addressee (the taxpayer), with the tax officials able to execute and enforce statutory powers conferred upon them in a hierarchical power structure.482 For example, Section 83483 and

Section 91484 of the Income Tax Act empower the Department of Inland Revenue to recover tax due or tax debt due to the Government of Namibia. As noted in the introductory paragraph, this is a power only a person in a higher position can enforce.

It is apparent that, the enforcement of taxpayers’ fundamental rights, such as that to a fair hearing, aims to balance this unequal relationship, thus providing protection to taxpayers.485

Having said that, it is adequate that, taxpayers use the law itself as a primary source of administrative action which is lawful, reasonable and fair.486

Various conditions must be met to fulfil the definition of “administrative action”.487 According to Currie,488 the elements which define “administrative action” can be summarised as follows, with all elements needing to be considered together, rather than individually, when determining whether an action constitutes administrative action:

a) a decision, or a proposed decision;

480 Baxter (1984:587). 481 Wolf (2012:98-187). 482 Burns (1999). 483 Section 83 of the Income Tax Act provides for the recovery of tax. 484 Section 91 of the Income Tax Act provides the power to appoint agent to recover tax on behalf of the government. 485 Wolf (2012:98-187). 486 Croome, B. 2010. Taxpayers’ Rights in South Africa (1). Cape Town: JUTA pp 150-250. 487 Grey’s Marine Hout Bay (Pty) Ltd v Minister of Public Works 2005 (6) SA 313 (SCA) as cited by Hoexter, C. 2012. Administrative law in South Africa. (2) Cape Town: JUTA p 195. 488 Curie, I. 2007. The Promotion of Administrative Justice Act: A Commentary. (2) Cape Town: Siber Ink pp 50-51.

b) of an administrative nature;

c) that is made in terms of an empowering provision;

d) that is not specifically excepted, or is not the subject of an exemption;

e) that is made by an organ of state or by a private person exercising public power

or performing a public function;

f) that adversely affects rights; and

g) that has a direct external legal effect.

Taken together, the above elements encapsulate administrative justice by which every individual has a legal redress in the event of any action, or omission, by an administrative agent that is perceived to the unjust or unreasonable.

According to Hoexter,489 the elements of the definition of “administrative action” are:

a) a decision;

b) by an organ of state (or a natural or juristic person);

c) exercising a public power or performing a public function;

d) in terms of any legislation (or in terms of an empowering provision);

e) that adversely affects rights;

f) that has a direct, external legal effect; and

g) that does not fall under any of the listed exclusions.

Certain executive and legislative powers have been excluded from the definition of administrative action, and private actions do not constitute administrative action.490 Currie491

489 Hoexter, C. 2012. Administrative law in South Africa, (2) Cape Town:JUTA at 203.Referring to Chirwa v Transnet Ltd 2008 (4) SA 367 (CC) and Grey’s Marine Hout Bay (Pty) Ltd v Minister of Public Works 2005 (6) SA 313 (SCA). 490 Kotze, L. J. 2004. “The Application Of Just Administrative Action In The South African Environmental Governance Sphere: An Analysis Of Some Contemporary Thoughts And Recent Jurisprudence”. African Journals Online. Available at https://www.ajol.info/index.php/pelj/article/viewFile/43463/26998; last accessed 20 April 2018. 491 Curie (2007:50-51).

90 emphasises that the fact of an action not meeting the criteria listed above does not mean that such action is not subject to any legal control, as such action will still be subject to other

Constitutional principles, such as legality.

It is important to note that the Namibian Constitution does not provide a definition of

“administrative action” and, therefore, Namibian common law does not contain an equivalent.

In Permanent Secretary Ministry of Finance v Ward,492 the court cited the case of President of

Republic of South Africa v South African Rugby Football Union (SARFU)493 in which the court held that the decision made by the President of the country to conduct an inquiry into the affairs of the SARFU did not constitute “administrative action” and was therefore not subject to review by the court, but was reviewable under the Constitution and in terms of the principle of legality. The court held that the test for determining whether conduct constitutes

‘administrative action’ is not simply whether the relevant action is performed by a member of the executive arm of government. In view of the above, one could agree that, what matters is not so much the functionary as the function, and the question is whether or not the task itself is administrative.

Taxation procedures, as currently practiced, involve the taking of administrative action by the executive branch of government.494 One may conclude that, for the proper advocacy of administrative law in tax dispute resolution, the best solution is for Namibia to develop a statutory provision containing a procedure that is effective in protecting the constitutional rights of the taxpayers, as well as being uncomplicated, in order for administrators to fulfil their daily work.

492 Permanent Secretary of the Ministry of Finance & Others v Ward 2009 (1) NR 314. 493 President of the Republic of South Africa and Others v South African Rugby Football Union and Others (CCT16/98) [1999] ZACC 11; 2000 (1) SA 1; 1999 (10) BCLR 1059 (10 September 1999). 494 Section 2 read with section 3 of the Income Tax Act provides for the administration of the Act that the Minister shall be responsible for carrying out the provisions of this Act.

4.3. Conclusion

There is no doubt that tax administration law covers an enormous number of issues.495 With regard to tax disputes, tax administration law is concerned with the fairness of the procedures involved in tax audits and disputes, and the perceived treatment the taxpayer receives from the tax authority.496 Since taxation procedures, as currently practiced, continue to involve the taking of administrative action by the executive branch of government, it has been established that tax law disputes should be settled in accordance with the principles of administrative law.497 Firstly, due to the fact that the receiver of revenue is deemed an administrative body according to Article 18 of the Namibian constitution,498 it automatically occupies a superior position to that of the taxpayer because it implements legislation which allows the administrator to impose certain requirements on the taxpayer with an obligatory nature. The receiver of revenue is rightly deemed an administrative body because it is responsible for the administration of tax law in Namibia on behalf of government and executes and enforces the statutory powers conferred upon it. As such, the taxpayer is in a subordinate position, being on the receiving end of the determinations of the receiver of revenue and having very little room to refuse any such impositions, except by raising a complaint through the necessary procedures.499 It therefore follows that the taxpayer’s right to be heard must be protected at all costs, in order to avoid possible arbitrariness on the part of the administrator – in this instance, the receiver of revenue.

495 Gordon, R. K. 1996. “Law of Tax Administration and Procedure”. In Thuronyi, V (Ed.) Tax Law Design and Drafting (1) International Monetary Fund: 1996. Available at https://www.imf.org/external/pubs/nft/1998/tlaw/eng/ch4.pdf; 27 May 2018. 496 Wolf (2012:98-187). 497 Burns(1999). 498 Section 2 read with section 3 of the Income Tax empowered the Minister to administer the Act and to be responsible for carrying out the provisions of the Income Tax Act No. 24 of 1982 (hereafter referred to as the tax act. 499 Wolf (2012:98-187).

Placing the taxpayer in a central position by improving and aligning tax dispute resolution procedures is an admirable undertaking.500 Tax jurisdictions such as the South African Revenue

Service (SARS) and the Australian Taxation Office (ATO) have improved and aligned their tax dispute resolution procedures to avoid, minimise and resolve disputes as quickly, cooperatively and collaboratively as possible.501 The next chapter deals with good practices implemented by SARS and ATO, which may be benchmarked in order to improve the procedures for resolving tax disputes in Namibia.

500 Tax Certainty (2017). 501 Leshego (2017).

CHAPTER 5: Improving Tax Dispute Resolution Procedures in Namibia: A

Comparative Perspective

5.1. Introduction

After considering the rights of taxpayers and their relationship with the tax authority in Chapter

4, it is imperative next to consider how disputes may be taken care of. There is no doubt that improving dispute handling procedures enhances the degree of compliance by taxpayers,502 or that placing the taxpayer at the centre of the process by improving and aligning tax dispute resolution procedures is an admirable enterprise.503 Thus, Chapter 5 will offer a comparative perspective, focusing on the efforts made by South Africa and Australia to improve and resolve tax disputes efficiently and effectively. The reasons for comparing the tax dispute resolution procedures of Namibia to those of South Africa and Australia are discussed in detail below.

5.2. South Africa and Namibia Compared

 Namibia achieved its independence on 21 March 1990, after 70 years of South African

rule, which had replaced the German protectorate established in 1884.504 Since

independence, Namibia’s economy has been linked to that of South Africa.505

Although a few changes have taken place in the tax regime of Namibia, the country’s

tax system remains predominantly based on a modification of the system of taxation

that previously existed in South West Africa.506

 South Africa and Namibia are both members of the Commonwealth Group.507 The

Commonwealth Group is a group of nations that support and work with one another

502 Gordon (1996). 503 Tax Certainty (2017). 504 Rakner (2002:5). 505 Rakner (2002:5) The Namibia Dollar is pegged to the South African Rand. 506 Wolf (2012:98-187). 507 Commonwealth Network. 2018. Available at http://www.commonwealthofnations.org/commonwealth/; last accessed 7 August 2018. The Commonwealth Group is a group of nations that support and work with one another in meeting international objectives. As such, they have common heritage in language, culture and law to mention a few.

in meeting international objectives.508 As such, they share a common heritage in

language, culture and law, to name but a few.

 South Africa has established the South African Revenue Services (SARS).509 SARS

is the nation’s tax collecting authority and is an autonomous agency responsible for

administering the South African tax system and customs service. Following suit,

Namibia enacted the Namibian Revenue Act No. 12 of 2017, as part of a drive to

achieve greater institutional efficiency and domestic resource mobilisation, given

operational constraints within its in-house models.

 South Africa has enacted the Promotion of Administrative Justice Act (PAJA), giving

effect to the right of citizens to administrative action that is lawful, reasonable and

procedurally fair, as well as the right to written reasons for administrative action.510

The PAJA paved the way for the Tax Administration Act (TAA), which seeks to

achieve efficient and effective collection of revenue by removing redundant

administrative provisions and harmonising provisions in terms of respecting the

taxpayer’s rights.511 South Africa also has a Tax Ombudsman Office, which ensures

that SARS lives up to the declarations contained in the Service Charter.512

508 ibid. 509 Established in terms of the South African Revenue Act of 1997. 510 Guidelines on the Implementation of the Promotion of Administrative Justice Act (PAJA) 2000. Available at http://www.dirco.gov.za/department/paja_guide_dirco_2017.pdf; last accessed 6 May 2018. 511 Smith, W. Tax 2016. Administration Act. Available at https://c.ymcdn.com/sites/sait.site- ym.com/resource/resmgr/2016_cpd_notes/2016_Tax_Administration_Act_.pdf; last accessed 5 May 2018. 512 2008. “You have the right to be treated fairly by SARS” Fair play publication, (9). Available at https://www.saipa.co.za/wp-content/uploads/2018/08/Fairplay-Issue-9.pdf; last accessed 20 April 2018.

5.2.1. Tax Dispute Resolution in South Africa

From a South African perspective, it is significant that the South African government enacted the Promotion of Administrative Justice Act (PAJA).513 It is apparent that, the PAJA is an important piece of South African legislation, and the cornerstone of administrative law in South

Africa.514 The PAJA gives effect to the right of citizens to administrative action that is lawful, reasonable and procedurally fair, as well as to the right to written reasons for administrative action, as contemplated in Section 33 of the Constitution of the Republic of South Africa,

1996.515 Hoexter516 believes that "the Constitution and, to a lesser extent, the PAJA have brought about a good deal of the reform Baxter517 hoped for”. This means that an effective decision-maker applies his or her mind to the facts of each case before coming to a decision.

As such, it may improve the process of decision-making and encourage consistency and rationality.

To implement the PAJA specifically in tax matters, South Africa further introduced the Tax

Administration Act (TAA).518 It is apparent that, the TAA seeks to consolidate the administrative and procedural provisions of the various tax laws into a single Act.519 This was done in order to promote a better balance between the powers and duties of the South African

Revenue Services (SARS) on the one hand, and the rights and obligations of taxpayers on the

513 Promotion of Administrative Justice Act No. 3 of 2000. 514 The Code of Good Administrative Conduct. Available at http://www.justice.gov.za/paja/docs/unit/PAJA_Code_draft_v2_2006.pdf; last accessed 18 April 2018. 515 Brynard, D. J. 2011. “Procedural fairness to the public as an instrument to enhance public participation in public administration, Department of Public Administration and Management”. Administratio Publica. Vol. 19 (4). Available at http://uir.unisa.ac.za/bitstream/handle/10500/10532/Administratio%20%20Publica%20%2019( 4)%202011%20Procedurak%20fairness.pdf?sequence=1; last accessed 19 April 2018 516 Hoexter (2004:165). 517 Baxter (1984). 518 Tax Administration Act No. 28 of 2011. 519 Johannes (2014).

96 other.520 It is established that, tax legislation, such TAA, seeks to achieve efficient and effective resolution of tax disputes and collection of revenue by removing redundant administrative provisions and harmonising the provisions in terms of respecting the taxpayer’s rights.521

Through TAA, the rules to be followed in lodging an objection and appeal were promulgated and gazetted.522 Furthermore, TAA legislate a timeframe within which a tax board has to deliver its decision.523

In order to achieve the above, the South African Minister of Finance, following consultation with the Minister of Justice and Constitutional Development, promulgated and gazetted the rules524 under section 103 of the Tax Administration Act. It is apparent that, the rationale for promulgating and gazetting the rules was to clearly set out and simplify the law for the taxpayers in terms of the procedures to be followed in lodging an objection and appeal against an assessment or a decision subject to objection and appeal, as referred to in Section 104(2) of that Act, as well as procedures for alternative dispute resolution, the conduct and hearing of appeals, application of notice before a Tax Court and transitional rules.525 Drawing on such good practices may assist in conducting and hearing of appeals within a reasonable time.

520 Keulder, C. 2011. Does The Constitution Protect Taxpayers Against The Mighty Sars? – An Inquiry Into The Constitutionality Of Selected Tax Practices And Procedures. LLM Thesis. University Of Pretoria. 521 Section 9 of the TAA specifically addresses tax disputes and the related resolution process. 522 Section 115 of the TAA provides that a taxpayer or SARS may approach the tax court to consider its case a new if the tax board does not deliver its decision within the required timeframe. 523 Moosa, F. 2018. “Tax Administration Act: Fulfilling human rights through efficient and effective tax administration.” De Jure. Vol. 51 (1:1-16). Available at http://dx.doi.org/10.17159/2225- 7160/2018/v51n1a1; last accessed 8 February 2019. 524 The ADR rules were made by the Minister of Finance and are equal status to regulations and similar subordinate legislation. 525 Government Notice. 2014. South Africa Revenue Serviced. Available at https://www.gov.za/sites/default/files/gcis_document/201409/37819gon550.pdf; last accessed 15 May 2018. Tax Administration Act: Rules: Procedures in lodging objections and appeals against assessment or decision, procedures for alternative dispute resolution, conduct and hearing of appeals, application on notice before tax court and transitional rules.

Section 9 of the TAA, read together with the rules given under Section 103 of the Tax

Administration Act, makes available legal structures for tax disputes across all tax categories found in the Act and administered by SARS.526 The aforementioned section does not only create the legal structure, but also stipulates the platforms and procedures to be followed when a taxpayer is aggrieved by an assessment or a specific decision formulated by SARS.527

Accordingly, one may agree that, stipulating the procedures at each platform is beneficial to the taxpayer in order to easily follow the procedures at each interval and to raise the taxpayer’s expectation of what is expected from both them and the tax administrator with regard to dispute settlement. Below is the process of how tax disputes are dealt with by SARS:

5.2.2. The Process of Dealing with Tax Disputes in South Africa

5.2.2.1. Tax Assessment or Decision

‘Assessment’ is defined in the South African Income Tax Act528 as “the determination by the

Commissioner, by way of a notice of assessment of an amount upon which any tax leviable under the Act is chargeable; or of the amount of any such tax.” Section 77(5)529 provides that

SARS shall, in the notice of assessment, advise that the taxpayer may object to the assessment.

The PAJA applies to South Africa Revenue Services (SARS) and gives taxpayers certain rights with regard to decisions made by SARS, as well as in the event that SARS fails to make a decision.530 It is apparent that any taxpayer who seeks to object to the assessment takes on the burden of proving that the assessment or decision is incorrect.531 One can conclude that, the

526 Leshego (2017). 527 ibid. 528 South Africa Income Tax Act No 58 of 1962. 529 Section 77(5) of the South Africa Income Tax Act No 58 of 1962 provides that “The Commissioner shall, in the notice of assessment, give notice to the taxpayer that any objection to the assessment made must be sent to him or her within the period contemplated in section 81.” 530 Red Ant Security Relocation and Eviction Services (Pty) Ltd v Commissioner for the South African Revenue ServiceCcase no. 2999/18 (GNP) (unreported). 531 ABC (Pty) Ltd v The Commissioner for the SA Revenue Service (ITC Case Number: 0038/2015) (ABC Case).

98 burden of proof refers to the degree of probability that must exist in order for a circumstance to form the basis of a tax assessment decision or judgment.532

With SARS, this is determined in terms of Section 102(2)533 of the TAA. However, the decision maker is obligated to provide reasons for their decision as well as for the results from that decision.534 In terms of rule 6(5), SARS is required to provide such reasons to the taxpayer within 45 days of the receipt of the request for these reasons from the taxpayer via e-filing.

Mongwaketse535 reveals that e-filing has not only enhanced the effectiveness of SARS and the efficiency of the delivery of tax services, but also tax compliance. One could agree that, this strategy may therefore assist taxpayers in receiving their assessment and being able to formulate an objection relating to their assessments in a timely manner. Furthermore, the

Government of South Africa has put in place supportive policies, ICT infrastructure and regulatory frameworks, which have not as yet been effectively leveraged to enhance service delivery to its citizens.536 Similarly to South Africa, Namibia has implemented electronic government or e-governance and an Integrated Tax Administration System (ITAS), but has yet to make any attempt to enhance service delivery as far as dispute settlement is concerned, due to the fact that objections and appeals are centralised.537

532 Wingate-Pearse v CSARS (830/2015) [2016] ZASCA 109 (1 September 2016). 533 Wheelwright, K. 1997. "Taxpayers' Rights in Australia". Revenue Law Journal. Vol. 7(1) Article 10. Available at: http://epublications.bond.edu.au/rlj/vol7/iss1/1; last accessed 10 October 2018. 534 MTN International v CSARS (275/2013) [2014] ZASCA 8 (14 March 2014). 535 Mongwaketse, P. B. 2015. Perceived effects of an electronic filing system on tax compliance in a district municipality, South Africa. Masters Thesis. North-West University. Available at https://dspace.nwu.ac.za/bitstream/handle/10394/17381/Mongwaketse_PB.pdf?sequence=1; last accessed 25 June 2018. 536 Jantjies, S. O. 2010. An Evaluation Of E-Government Within The Provincial Government Western Cape (PGWC). Masters Thesis. University of Stellenbosch. Available at Http://Scholar.Sun.Ac.Za; last accessed November 2018. 537 Republic of Namibia Ministry of Finance. 2014. Press Release on Centralisation of Objections to Tax Assessments. Available at mof gov na documents 27827 173584 Press Release Centralization Objections Tax Assessments pdf d34ab089 f982 4259 840c 83639cbb0cd9; last accessed 14 August 2018.

5.2.2.2. Objections

Section 104538of the TAA makes provision for the taxpayer to object to an assessment. SARS is obligated to notify the taxpayer of the authorisation or dismissal of their objection – and the basis thereof – under Section 106(2) of the Act within 60 days after delivery of the taxpayer’s objection.539 Taxpayers may therefore be in position to file an appeal on time.

It has been noted that before PAJA, many objections and appeals were delayed inordinately by

SARS as a result of staff not making decisions, and that the introduction of this act compelled

SARS to deal with matters far more quickly than in the past.540 Drawing on such good practices may assist Namibia in improving on its service.

As part of the government’s commitment to delivering a better service to taxpayers, SARS introduced an automated system whereby taxpayers are able to lodge objections and disputes via e-filing and to electronically manage their profiles online.541 To effectively implement that, guidance to the e-filing process is made available to taxpayers to ensure that disputes are submitted according to legislative requirements and thereby eliminating any possible invalid disputes from being submitted to SARS.542

538 In terms of section 104 (1) of the Tax Administration Act 28 of 2011 (TAA), a taxpayer who is aggrieved by an assessment made in respect of the taxpayer may object to the assessment. 539 Section 106(2) provides that “ Any form, notice, demand, document or other communication required or authorized under this Act to be issued, given or sent to or served upon any person by the Commissioner or any other officer under this Act shall, except as otherwise provided in this Act, be deemed to have been effectually issued, given, sent or served...” 540 SAICA. 2003. Constitutionality and current approach by SARS with reference to collection of taxes. Available at www.saica.co.za; last accessed 4 May 2017. 541 South Africa Revenue Service (SARS) Annual Report 2013/2014. Available at https://www.gov.za/sites/default/files/SARS-Annual_Report_2013-2014.pdf; last accessed 28 July 2018. 542 South African Revenue Service (SARS). 2014. Alternative Dispute Resolution: What To Do If You Dispute Your Tax Assessment Available at http://www.sars.gov.za/AllDocs/OpsDocs/G.uides/LAPD-TAdm-G07%20- %20Guide%20on%20Dispute%20of%20a%20Tax%20Assessment.pdf; last accessed 22 October 2018.

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It follows that, the e-governance policy entails access to and delivery of government services, dissemination of information and quick and efficient communication.543 One understands that, the basic purpose of e-governance is to simplify processes for all, with the aim of enhancing the government’s ability to address the needs of the general public; i.e., government, citizens, businesses, etc. at national, state and local levels.544 Through the implementation of such e- governance initiatives, the South African government aims to provide higher quality and faster service to the public.545

Despite South Africa’s significant investment in ICT infrastructure, policy and regulatory framework in order to effectively roll out e-governance services, the developing country still faces a number of challenges for citizens living in poor and remote rural areas of the provinces, where there is a shortage of people skilled in ICT.546

The improved system offers a wide range of benefits, such as the ability to lodge disputes, request reasons and manage tax affairs more efficiently.547 One may conclude that the introduction of e-filing and handling disputes via e-governance may reduce the handling costs of tax returns, improve turnaround for their processing and assessment, facilitate objections and improve tax compliance.

543 Saxena, K. B. C. 2005. “Towards Excellence in E-Governance”. CEXIM Working Paper Series, UNPAN. Available at http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan045361.pdf; last accessed 20 October 2018. 544 ibid. 545 Naidoo, G. 2011. “An overview of eGovernment Policy Initiatives in the South African Government”. In Handbook of Research on E-Services in the Public Sector: E-Government Strategies and Advancements. Available at http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.539.3055&rep=rep1&type=pdf; last accessed 15 June 2018. 546 Mawelaa, T. Ochara, N. M. Twinomurinzic, H. 2017. E-Government Implementation: A Reflection on South African Municipalities. Available at http://www.scielo.org.za/pdf/sacj/v29n1/09.pdf; last accessed 13 May 2018. 547 Jantjies (2010).

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5.2.2.3. Alternative Dispute Resolution (ADR)

ADR is considered a formal mediation process for tax, and a potential mechanism to accelerate the resolution of disputes.548 This is due to the fact that it is invariably both a cost effective and an efficient route to dispute resolution. The South African Revenue Service (SARS) introduced the ADR process549 after it had received numerous complaints from taxpayers regarding the lengthy period taken to resolve objections to assessments.550 As compared to court proceedings,

ADR is less formal, less costly and allows for disputes to be resolved within a reduced time frame.551 It affords the taxpayer the opportunity to resolve a tax dispute without the use of litigation.552 Mhahlele and Erasmus553 state that the parties subject to the ADR process have an opportunity to elect to have a facilitator (a SARS official who is in good standing in the arbitration, medication, legal, tax or accounting profession, has experience in the aforementioned fields and complies with the duties as per rule 17 of the notice) to facilitate the process in terms of rules 16(1) and (2).554

It is submitted that ADR can add value to tax cases that have been going on for an extended period.555 In Namibia, ADR is only available upon referral by the court after the case has already gone through litigation.556 While ADR does not guarantee resolution, it certainty can

548 Wheelwright (1997). 549 Chapter 9 of the Tax Administration Act No 28 of 2011 provide for the Alternative Dispute Resolution (ADR). Regulations on alternative dispute resolution procedures and settlement were introduced under sections 107A and B of the Income Tax Act, effective from 1 April 2003. The Tax Board, with jurisdiction when the tax in dispute does not exceed R100,000; The Tax Court, with jurisdiction when the tax in dispute is in excess of R100,00. 550 Dwyer, I. 2004. The rights and remedies of taxpayer in the New South Africa. Master of Commerce Thesis, University of Kwa-Zulu Natal, Durban. Available at http://researchspace.ukzn.ac.za/xmlui/bitstream/handle/10413/1496/Dwyer_Ian_2004.pdf?se quence=1; last accessed 4 October 2018. 551 ibid. 552 Wheelwright (1997). 553 Leshego, M. (2017). 554 The agreement is reached by considering the counterparty’s analysis of the facts, the counterparty’s application of tax law to the facts or both. 555 Thuronyi (2013). 556 Nyanga (2016:32).

102 expedite the process.557 One is content to conclude that engaging technical expertise via ADR in tax and administrative law will assist in reviewing matters fairly and equitably, ensuring that the issues are scrutinised in the best interests of both the State and the taxpayer.

5.2.2.4. Settlement Agreements or Compromises on a Portion of Tax Debt

A settlement agreement is referred to in Section 200 of the Tax Administration Act 28 of

2011,558 whereby a senior SARS official may authorise the “compromise” of a portion of a tax debt upon request by a “debtor”, in compliance with the requirements of section 201, if:

a) the purpose of the “compromise” is to secure the highest possible net return from the

recovery of the tax debt; and

b) the “compromise” is consistent with considerations of good management of the tax

system and administrative efficiency.

For example, in the case of South African Revenue Services v Malema559, Mr Malema entered into a compromise agreement with SARS as envisaged under the terms of Section 200 of the

Tax Administration Act 28 of 2011 (the Act) and fulfilled the terms of the compromise.

Subsequently, on 5 February 2015, SARS informed Mr Malema that it was not bound by the compromise agreement because he had allegedly failed to make a full and frank disclosure.

As can be seen, section 200 of the TAA affords both SARS and the taxpayer an opportunity to resolve a tax dispute by way of a settlement.

Admittedly, settling a tax debt in this way may assist in creating a ‘clean break’ situation, providing a quick and dignified conclusion and avoiding the considerable time and cost

557 Thuronyi (2013). 558 South African Revenue Service (SARS). 2014. Dispute Resolution Guide: Guide On The Rules Promulgated In Terms Of Section 103 Of The Tax Administration Act, 2011. Available at https://c.ymcdn.com/sites/sait.site-ym.com/resource/resmgr/2014_SARS_-_October_/LAPD- TAdm-G05_-_Dispute_Reso.pdf; last accessed 16 September 2018. 559 South African Revenue Services v Malema (76306/2015) [2017] ZAGPPHC 396 (6 February 2017).

103 involved in engaging in court proceedings, for example. 560 This arrangement is not currently available under Namibian tax law, and it may represent an example of good practice that the country can emulate. A tax matter that remains unresolved after the consideration of both

ADR and settlement may be subject to an appeal through the Tax Board or the Tax Court.561

5.2.2.5. Tax Board

The Tax Board is an administrative tribunal established by the Minister of Finance under

Section 108 of the TAA.562 Both the taxpayer and SARS must consent for a matter to be heard by Tax Board in terms of Section 109(1)(b).563 The Tax Board hears appeals related to tax in disputes that do not exceed the amount determined by the Minister under Section (a) of the

TAA.564 In terms of Section 114(2) of the TAA, the Tax Board’s decision must be provided within 60 days of the conclusion of the hearing. Due to the existence of the TAA which provides for the timelines, the process of tax hearings in South Africa makes it much faster and easier for a taxpayer to fully comply with the law and understand technical aspects of the law.565

Any party who is not satisfied with the decision of the Tax Board may, within 21 days of the date of the notice of the Tax Board’s decision, request for the appeal to be referred to the Tax

Court in terms of section 115(1) of the TAA.566

560 Honeyball, D. 2013. SARS: Waiving and compromising tax debts. Available at https://www.thesait.org.za/news/126401/SARS-Waiving-and-compromising-tax-debts.htm; last accessed 18 May 2018. 561 Leshego (2017). 562 Section 108 of the TAA establishes the tax board. The Minister may by public notice establish a tax board or boards for areas that the Minister thinks fits; and abolish an existing tax board or establish an additional tax board as circumstances may require. 563 PwC. 2012. Tax Law Review of the Tax Administration Act No 28 of 2011. Available at https://www.pwc.co.za/en/assets/pdf/tax-law-review-nov-2012.pdf; p 52 last accessed 22 December 2018. The Tax Board may only hear appeals involving disputes up to the value of R500,000. 564 ibid. 565 South African Institute of Tax professionals (SAIT) Short Guide on Tax Dispute Resolution Rules. 2014. Available at https://c.ymcdn.com/sites/sait.site- ym.com/resource/resmgr/SAIT_Short_Guide_on_Tax_Disp.pdf; last accessed 7 September 2018. 566 SARS (2014).

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5.2.2.6. Tax Court

The Tax Court is an administrative tribunal established by the President of the Republic under section 116 of the TAA.567 The Tax Court consists of a judge of the High Court, as well as an accountant member and a commercial member, appointed by the President of the Republic.568

Sittings of the Tax Court are generally not public, although the president of the Tax Court may, in the circumstances of an exceptional application brought by any person, allow a sitting to be made public.569This is possibly intended to protect the taxpayer’s identity, according to the right to equality as provided for in the Constitution. Convincingly, public sittings may promote tax compliance since others may thus come to know the importance of paying tax and the potential consequences of non-compliance.570

The Tax Court has the authority to interpret and apply the law with regards to tax appeals lodged under section 107 of the TAA.571 In addition, the Tax Court may hear and decide “an interlocutory application or an application in a procedural matter relating to a dispute that falls under section 9 of the TAA. The decisions of the Tax Court are binding only between the parties involved in the dispute.572 The Court is absolute; however, both the taxpayer and SARS have the right to further appeal to the High Courts.

567 Section 116 of TAA provides that “The President of the Republic may by proclamation in the Gazette establish a tax court or additional tax courts for areas that the President thinks fit and may abolish an existing tax court as circumstances may require. (2) The tax court is a court of record.” 568 The Tax Court may also, in matters involving more than R50 million tax in dispute and with the approval of the Judge-President …jurisdiction within which the Tax Court sits, consist of three judges of the High Court and the two members. 569 SARS (2014). 570 Erzo, F. Luttmer, P. Singhal, M. 2014. “Tax Morale”. Journal of Economic Perspectives. Vol. 28 (4):149–168. Available at https://users.nber.org/~luttmer/taxmorale.pdf; last accessed 5 July 2018. 571 SARS (2014). 572 ibid.

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5.2.2.7. The High Courts

The High Courts, which were previously called “The Supreme Courts”, are spread throughout

South Africa and are regulated by the Superior Courts Act, 2013.573 It appears to assume that, this may represent another method for decentralising the court system, in order to ensure effective service delivery and justice for all.

Should either the taxpayer or SARS not be satisfied with the decision of the Tax Court, they may appeal the decision in the High Courts, under the terms of Section 133 of the TAA574. The decision of the High Courts is binding on all lower courts and tribunals. Furthermore, the decision of the High Court is of “persuasive value” in other High Courts, unlike the decision of the Tax Court.575 Similarly to the situation in Namibia, the sittings of the High Courts are public judgments and are published for general information.

5.2.2.8. Supreme Court of Appeal (SCA)

The Supreme Court of Appeal (SCA) was established in 1997.576 The SCA is seated in

Bloemfontein and is the highest court in South Africa, except for in constitutional matters.577

It generally only deals with cases referred from the High Court, but statutory provision is made in Section 133 of the TAA for direct access to the Tax Court.578 The sittings of the SCA are public and its judgments are published for general information. The judgments of the SCA are

573 The South African Judiciary. High Court. Available at https://www.judiciary.org.za/index.php/about-us/100-high-court; last accessed 10 June 2018. The High Courts have jurisdiction over the defined provincial areas in which they are situated and over all persons and the decision of a division are binding on magistrate’s court within its area of jurisdiction. 574 Section 133 of the TAA provides that “The taxpayer or SARS may in the manner provided for in this Act appeal against a decision of the tax court under sections 129 and 130...” 575 Leshego (2017). 576 ibid. 577 ibid. 578 Section 133(2)(b) of the TAA, permits direct access to the Supreme Court of Appeal from the Tax Court.

106 binding on all lower courts and tribunals and, except for the Constitutional Court, no other court can overrule a decision of the SCA.579

5.2.2.9. Constitutional Court

The Constitutional Court is the highest court in all constitutional matters in South Africa.580 It is the only court that may adjudicate disputes between organs of the national or provincial spheres of Government concerning the constitutional status, powers or functions of any of those organs of state that may decide on the constitutionality of any amendment to the constitution or any parliamentary or provincial Bill.581 Given this, the Constitutional Court is able to overturn a decision of the Supreme Court of Appeal if the decision pertains to a constitutional matter.

The Constitutional Court makes the final decision on whether or not an Act of Parliament, a provincial Act or the conduct of the President is constitutional.582 In the context of tax appeals, the Constitutional Court has the limited jurisdiction of reviewing an SCA judgment dealing with tax appeals.583 Unlike South Africa, Namibia does not have a Constitutional Court, with the Supreme Court of Namibia being the highest court in the legal hierarchy of Namibia.584

579 Leshego (2017). 580 Carmichele v Minister of Safety and Security (CCT 48/00) [2001] ZACC 22; 2001 (4) SA 938 (CC); 2001 (10) BCLR 995 (CC) (16 August 2001). Available at http://www.sahistory.org.za/jquery_ajax_load/get/topic/courts-position-justice-system; last accessed 9 May 2018. The Court’s position in the justice system. 581 Berat, L. 2005. "The Constitutional Court of South Africa and Jurisdictional Questions: In the Interest of Justice". International Journal of Constitutional Law Vol. 3 (1):39-76. Available at https://heinonline.org/HOL/P?h=hein.journals/injcl3&i=45 Accessed in November 2018; last accessed 7 October 2018. 582 ibid. 583 Leshego (2014). 584 Amoo, S. K. 2008. “The Structure of the Namibian Judicial System and its Relevance for an Independent Judiciary”. In Horn, N & Bosl. A (Eds.) The Independence of the Judiciary in Namibia. Windhoek: Macmillan Education p 69–98.

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5.2.2.10. The Tax Ombudsman

The TAA authorises the Tax Ombudsman, independently of SARS, to review a complaint and, if necessary, to resolve it through mediation or conciliation.585 The Tax Ombudsman may only review a request if the requester has exhausted the available complaint resolution mechanisms provided in SARS, unless there are compelling circumstances for not doing so.586 Namibia also has an Ombudsman, who functions as a watchdog for the people, and is tasked with holding the government accountable for its actions.587 The broad mandate of the Ombudsman gives the citizens an expert and impartial agent to represent them in a wide variety of matters, without personal cost or bureaucratic hurdles to the complainant, without time delay, without the tension of adversary litigation, and without the requirement of professional legal representation.588 It appears that the Namibian Ombudsman office needs to be strengthened with the relevant skills as regards taxation.589

It follows that, if the taxpayer remains dissatisfied with a matter after having exhausted the internal complaints process under SARS and the Tax Ombudsman’s complaints resolution mechanism, he may lodge a complaint with the Public Protector.590 Nothing prevents him from lodging a complaint with the Public Protector from the outset, but it is anticipated that most matters would be resolved by SARS or the Tax Ombudsman before entering the more protracted process of the Public Protector, wherein the necessary tax administration expertise may be less accessible.591

585 Tax Ombud Annual Performance Plan 2018/19. Available at http://pmg-assets.s3-website-eu- west-1.amazonaws.com/Tax_Ombud_Annual_Performance_Plan_201819_BURO.pdf; last accessed 25 October 2018. 586 Leshego (2017). 587 Ruppel-Schlichting, K.G.V.E. 2008. “The Independence of the Ombudsman in Namibia”. In Horn, N. & Bösl, A. (Eds.). The Independence of the Judiciary in Namibia. Windhoek, Macmillan. 588 ibid. 589 ibid. 590 Matters handled by the Public Protector include, maladministration, dishonesty or improper dealings with respect to public money or improper enrichment. 591 Wolf (2012:98-187).

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5.2.3. Differences and Similarities

In both Namibia and South Africa, a taxpayer who seeks to object to an assessment has the burden of proving that the assessment is incorrect. Although the burden of proof and objections and appeals processes in South Africa are similar to those of Namibia, problems regarding delays and assessments not being delivered on time are of legal concern and require serious attention in the latter country. South Africa has an improved system whereby assessments are completed via e-filing592 and are sent out electronically. Drawing on such good practices may assist Namibia on addressing the assessments delays.

Furthermore, the South African government has introduced an e-governance policy and disputes can be handled effectively via e-governance.593 Such advances in technology hold great potential for helping the South African government respond to its challenges; namely, better service delivery, better procurement, efficient working and better communication with citizens and businesses.594 In Namibia, e-governance policy has been driven by the Presidential economic blueprint – the Harambe Prosperity Plan595 – as way of bringing the government closer to the people and also of cutting out the bureaucratic bungling which characterises most public institutions when it comes to the dissemination of information. Due to illiteracy and lack of skills, Namibia, as a developing country, is lagging far behind industrial countries such as

Australia and the United Kingdom when it comes to internet usage.596

592 Mongwaketse, P. B. 2015. Perceived effects of an electronic filing system on tax compliance in a district municipality, South Africa. MBA Thesis. North-West University. Available at https://dspace.nwu.ac.za/bitstream/handle/10394/17381/Mongwaketse_PB.pdf?sequence=; last accessed 5 September 2018. 593 Pillay, K. N. 2012. e-Government in South Africa: Predictors to failure and success. Masters Thesis. University of Witwatersrand. Available at http://wiredspace.wits.ac.za/bitstream/handle/10539/12394/EGov%20- %20Final_CD.pdf?sequence=2&isAllowed=y; last accessed 17 April 2018. Even though the SARS e-Filing system is successful in its own right, cognisance must be taken of the fact that it serves a fraction of the economically active section of South African society. Those that have access to the internet are able to participate in this programme. 594 Naidoo (2012:62). 595 Republic of Namibia. The Harambe Prosperity Plan 2016/17 – 2019/20. 596 UN (2008).

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To improve on dealing with assessments, Namibia is establishing the Namibian Revenue

Agency, whose activities are aimed at improving the tax administration system by developing a new system called the Integrated Tax Administration System (ITAS).597 ITAS is a new process which is re-engineering the tax database and is designed to improve the collection of taxes and the delivery of customer service.598 This transition is planned to take place by 1st

March 2019. One anticipates that the e-Filing system will be successful, as it is already being applied in other countries, such as South Africa and Australian Tax Office.

ADR processes are present in South Africa. In Namibia, ADR processes are not fully present internally, except when directed by the court after a case has gone through litigation.599 This difference indicates that Namibia needs to introduce an independent mediation regime in order to avoid undue delays in the appeal system. One may agree that, legislated time frame may help to reduce waiting times for appeals as well as the associated costs and stress for taxpayers, which are associated with the process of making an appeal at present.

Namibia does not have the PAJA, TAA, Tax Ombudsman or Constitutional Court as South

Africa does. The settlement of tax disputes through a process of mediation, something prevalent in most countries, is almost absent in Namibia.600 Unlike South Africa, and in the absence of an Administration Act such as the PAJA or TAA, Namibia does not have a streamlined policy or diagrammatic guidelines or outlay of the process on administration and resolution of objections, procedures for ADR, rules governing the conduct and hearing of appeals and guidelines on how the taxpayer can lodge a complaint with the Tax Ombudsman for review.601

597 Inland Revenue Department. ITAS. Available at https://www.itas.mof.na/; last accessed 14 May 2018. ITAS is expected to provide new functions and reporting capabilities. 598 KfW Development Bank. 2015. Information Technology in Tax Administration in Developing Countries. Available at https://www.taxcompact.net/documents/IT-Tax-Administration- Study.pdf; last accessed 20 August 2018. 599 Nyanga (2016:32).

600 Wolf (2012:98-187). 601 Nyanga (2016:32).

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For example, the introduction of the TAA improves the constitutional rights of taxpayers to privacy, access to information such as guidelines, just administrative action and access to permanent courts.602 Thus, the good practices demonstrated above may assist a country like

Namibia in seeking some fundamental changes to the legislation which it believes are necessary to ensure the objection and appeal system achieves its objectives and operates in consideration of the rights of taxpayers to a fair hearing within a reasonable time.

Unlike South Africa, the Namibian Income Tax Act does not confer the commissioner or the minister with the right to enter into a settlement agreement or compromises on a portion of tax debt with the taxpayer.603 A settlement or compromise agreement is entered into between the tax authority and the taxpayer, agreeing on a portion of tax debt in order to secure the highest net return from the recovery of the tax debt in a way which is consistent with the considerations of good management of the tax system and administrative efficiency.604 Although there are instances whereby the Namibian Minister of Finance will call for a tax amnesty (subject to conditions which apply to all taxpayers), this does not amount to a settlement agreement as practiced in South Africa, which can facilitate a timely resolution of disputes without lengthily litigation processes and assessed on individual merit.605

South Africa and Namibia’s courts and tribunals may differ in name, but in most respects, they provide similar platforms to taxpayers in terms of legal action and appeal. Both countries provide taxpayers and tax administration authorities access to the courts and options to object to and appeal the decision of lower courts or tribunals. However, the comparison above reveals

602 Moosa (2018:1-16). 603 Section 200 of the TAA affords both SARS and the taxpayer an opportunity to resolve a tax dispute by way of a settlement. 604 SARS (2014). 605 EY International. “Namibia extends tax amnesty program to 3 April 2018” Global Tax Alert. Available at https://www.ey.com/Publication/vwLUAssets/Namibia_extends_tax_amnesty_program_to_3_ April_2018/$FILE/2018G_01641-; last accessed 7 September 2018.

111 a few areas of concern. First, the most concerning revelation is that Namibia does not have a tax administration act that consolidate the administrative and procedural provisions of the various tax law.606 This is primarily problematic in that, as it functions in other jurisdictions, such an act provides guidelines as to how tax courts and/or tribunals must be constituted, the members thereof and their standing, the procedure to be followed with respect to the dispute process itself and also the different recourses that a taxpayer may pursue. The existence of such an act, in itself, creates a legal and certain place of reference for both the state and the taxpayer.607 It provides a base and serves as a guideline for both parties on what to do in various legal circumstances. For example, where should a taxpayer go to for recourse in the first instance? What should they expect at each stage? When and how should they escalate an issue, and how can they ensure they are heard? These concerns demonstrate what is currently missing from the Namibian legal system. A few specific examples from the tax dispute resolution process show that that (i) tax tribunals and special courts do not convene often enough and, when they do, it is never abundantly clear to the taxpayer what his options are; (ii) the composition of such courts is questionable, as this research has revealed some anomalies around the appointment process – i.e., the members selected for such panels could be better qualified, and perhaps have expert knowledge on the subject matter.

5.3. Australia and Namibia Compared

606 The Tax Administration Act seeks to consolidate the administrative and procedural provisions of the various tax laws into a single Act. 607 Through the TAA, South Africa promulgated the South African Revenue Service Dispute Resolution Guide: Guide On The Rules Promulgated In Terms Of Section 103 Of The Tax Administration Act, 2011 Date Of First Issue : 28 October 2014.

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 Australia-Namibia relations date back to the 1970s and 1980s, when Australia

supported United Nations (UN) action in the peacekeeping operation in Namibia.608

The relationship between the two countries is growing in a range of common interests

and shared objectives, especially in the commercial sector.609

 Both countries are members of the Commonwealth Group.610 The Commonwealth

Group is a group of nations that support and work with one another in meeting

international objectives. As such, they share a common heritage in terms of language,

culture and law, to name but a few.

 Just like South Africa, Australia has established an Australian Tax Office, which is

the government’s principal revenue collection agency. It is role is to manage and shape

national tax, excise and superannuation systems, and it acts as custodian of the

Australian Business Register. Namibia is following suit, having enacted the Namibia

Revenue Agency Act No. 12 of 2017. 611

 Australia has its Tax System (Tax Administration Act No. 179 of 1999) and Practice

Settlement Law Administration 2015/1,612 which give effect to the right to

administrative action that is lawful, reasonable and procedurally fair, as well as the

right to written reasons for administrative action.

608 Returned Services League Australia. Peacekeeping Operations. Available at http://rslnsw.org.au/commemoration/heritage/peacekeeping-operations; last accessed 19 August 2018. Since 1947 Australia has had peacekeepers in the field with the United Nations continuously for over 50 years. 609 Smit, N. 2012. “Australia opens consulate in Namibia”. The Namibian. Available at https://www.namibian.com.na/index.php?id=93203&page=archive-read; last accessed 22 May 2018. Australian government has opened an honorary consulate in Windhoek, and the Australian Prime Minister's Special Envoy for Africa, Bob McMullan, believes the move is necessary to carry forward a long relationship between Namibia and Australia.” 610 Australia Minister for Foreign Affairs and Trade. 2010. Australia and Africa: Looking to the Future Speech by Stephen Smith MP, Minister for Foreign Affairs (check against delivery). Available at https://foreignminister.gov.au/speeches/2010/100319_australia_and_africa.html; last accessed 9 July 2018. 611 Namibia Revenue Agency Act 12 of 2017 established the Namibia Revenue Agency and to provide for its powers, functions and management; and to provide for incidental matters. 612 Leshego (2017).

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 The Australian Taxation Office (ATO) has an improved system of Alternative Dispute

Resolution (ADR), with consistent and clear information provided to the taxpayer to

understand their rights and entitlements.613 The ATO offers simple interaction with

taxpayers and maximises automation to reduce the costs associated with tax

compliance.614 The ATO also has specialised Problem Resolution Units, which seek

to quickly resolve more serious problems of an administrative character, where

taxpayers have no formal avenue of review or redress.615

 The taxpayer rights and protection charter in Australia has assisted the ATO in

resolving disputes within a reasonable time.616 The ATO is subject to scrutiny and

aims to resolve tax disputes efficiently and effectively.617

 The ATO established the Small Tax Claims Tribunal (STCT) in 1997, which handles

tax disputes involving amounts below N$5,000, with an emphasis on mediation of

disputes and streamlined procedures, rather than formal hearings.618 The Law and

Justice Legislation Amendment Act619 establishes a Small Taxation Claims Tribunal

within the Administrative Appeals Tribunal. The STCT aims to provide taxpayers

with a quick and inexpensive means of resolving disputes with the ATO with as little

formality as possible.620 In small tax cases, a conference between the taxpayer and a

613 Jone (2015:552-580) ADR is a term that emerged in Australia legal circles in the 1980s and is now defined as “an umbrella term for processes, other than judicial determination, in which an impartial person assists those in dispute to resolve the issues between them. 614 Tran-Nam (2012) 615 Commonwealth of Australia. 2001. “The Australian Taxation Office’s Administration of Taxation Rulings”. The Auditor-General Audit Report No. 3 2001–2002 Australian. Available at https://www.anao.gov.au/sites/g/files/net4981/f/anao_report_2001-2002_03.pdf; last accessed 20 November 2018. 616 Organisation for Economic Cooperation and Development (OECD). 2016. Advanced Analytics for Better Tax Administration: Putting Data to Work. OECD Publishing, Paris 2016. 617 Jone (2015:552-580). 618 Leshego (2017). 619 Law and Justice Legislation Amendment Act Act No. 34 of 1997. 620 Jone, M. 2017. “What Can the United Kingdom's Tax Dispute Resolution System Learn from Australia? An Evaluation and Recommendations from a Dispute Systems Design Perspective“. Australian Tax Forum. Vol. 32 (1). Available at https://ssrn.com/abstract=2954289; last accessed 29 April 2018.

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representative of the ATO is held approximately four weeks after the lodgement of an

application.621 This may be a good means of providing a cheaper and more informal

way to resolve disputes between the typical taxpayer and the Receiver of Revenue.

 Within the Australian Ombudsman, there is a special Tax Adviser to the Ombudsman

supported by a team of tax experts, whose role it is to “serve as a check to

administrative errors open up another avenue for independent review of ATO action,

and significantly improve equity in the tax system”.622

5.3.1. Tax Dispute Resolution in Australia

In Australia, there are two levels of government: federal623 and state. Each separately imposes and administers its own taxes.624 The federal government collects the largest amount of taxes and uses the money collected to grant funding to the states/territories and local governments.625

States, on the other hand, receive funding from the Commonwealth government, and there is nothing to prevent states from raising their own income taxes.

As with any tax authority, disputes between the taxpayer and the federal or state government are a regular occurrence in Australia.626 According to Binh and Walpole, tax disputes can be said to occur when the taxpayer disagrees with the assessment provided by ATO627 in respect of the taxpayer’s tax liability or entitlements and related issues and takes some action regarding this disagreement.

621 Leshego (2017). 622 Richardson, J. A. O. 1984. “The Australian Commonwealth Ombudsman: State of the institution”. Presentation to the International Ombudsman Institute Canberra. Available at http://www.ombudsman.gov.au/docs/bibliographies/speeches_institution_as_it_exists_in _Australia.pdf; last accessed 31 August 2018. 623 The federal government was created by the Constitution of Australia, which came into effect in 1901 at the time of Federation. 624 Leshego (2017). 625 ibid. 626 Frost, T. Hanson, C. 2014. “Australia”. In Whitehead, S. (Ed.) The Tax Disputes and Litigation Review. (2) United Kingdom: Law Business Research Ltd. 627 Tran-Nam (2012). ATO is a non-corporate Commonwealth entity within treasury portfolio and is led by Chris Jordan the Commissioner of Taxation.

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Among its objectives, the Australia Tax Office (ATO) aims to preclude the occurrence of disputes by simplifying the law and issuing public rulings, as well as providing vital information on solving disputes.628 However, should tax disputes arise, the stated objective of the ATO is to resolve them efficiently and effectively.629 The ATO has introduced or adapted a number of dispute management principles,630 strategies and techniques to avoid, minimise and resolve disputes as quickly, cooperatively and collaboratively as possible, such as the facilitative, advisory and determination processes.631

Similarly to South Africa, the internal and external procedures for resolving tax disputes are well known in Australia.632 An important feature of the ATO’s process are the Law

Administration Practice Statements, of which Part IVC makes provisions relating to tax objections, reviews and appeals.633 The Law Administration Practice Statements (LAPSS) are neither law not public rulings; however, they are primarily there to provide direction to ATO staff members on the approach to be taken when performing duties involving the law administered by ATO.634 Below, is the process on how the tax disputes are dealt with in

Australia.

628 Commonwealth of Australia. (2001). 629 Leshego (2017). 630 Organisation for Economic Cooperation and Development (OECD). 2017. Tax administration 2017: Comparative information on OECD and Other Advanced and Emerging Economies. OECD Publishing: Paris. 631 Australian Government Inspector-General of Taxation. 2012. Review into the Australian Taxation Office’s use of early and Alternative Dispute Resolution. Available at https://cdn.tspace.gov.au/uploads/sites/16/2014/11/alternative-dispute-resolution.pdf; 9 September 2018. 632 Tran-Nam (2012). 633 Australian Government Inspector-General of Taxation. 2016. Chapter 5 Complexity, Tax Law Design and The Commissioner’s Role. Available at http://igt.gov.au/publications/reports-of- reviews/improving-the-self-assessment-system/chapter-5-complexity-tax-law-design-and-the- commissioners-role/; last accessed 23 April 2018. 634 Australian Taxation Office. 2018. Practice Statement Law Administration. Available at https://www.ato.gov.au/General/ATO-advice-and-guidance/ATO-guidance-products/Law- administration-practice-statements/; last accessed 9 October 2018.

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5.3.2. The Process of Dealing with Tax Disputes in Australia

5.3.2.1. Tax Assessment

The tax system in Australia is based on a self-assessment model.635 This means that the taxpayer must submit an annual tax return, which is a reflection of the taxpayer’s assessable income and the deductions and other credits to which the taxpayer is entitled according to the terms of the Act.636 The ATO may review this assessment to make their own determination of the tax liability and whether or not an amount is taxable or deductible.637 Taxpayers are given the opportunity to object to an assessment or decision made by the ATO.638

5.3.2.2. Objection

A taxpayer who is not satisfied with an assessment or decision may object to it under the terms of Part IVC of the Tax Administration Act.639 Importantly, the objection should be lodged within one of the three following categories:640

. Two years: This is applicable for an objection to an assessment of income tax

being made by individuals and small businesses;

. Four years: This is applicable for companies and individuals with more complex

matters than those mentioned above; or

. Sixty days: This is applicable to all other matters

Unlike in South Africa, a decision from the Commissioner of the ATO is not required, by statute, to be provided within a specific time limit.641 If the Commissioner disallows the objection, the tax dispute may be resolved through the use of an ADR process, the ATO’s

635 Leshego (2017). 636 Tran-Nam (2012). 637 Leshego (2017). 638 Tran-Nam (2012). 639 Taxation objections, reviews and appeals. Part IVC of Taxation Administration Act 1953 No. 1, 1953 as amended. 640 Leshego (2017). 641 ibid.

117 independent review, the Administrative Appeals Tribunal or the courts. Similarly, to South

Africa, emphasis has been placed on ADR as an avenue provided to the taxpayer to prevent the large expenses associated with tax litigation.642 One could agree that the goal of tax cases should be to reduce the costs associated with dispute resolution.

5.3.2.3. Alternative Dispute Resolution

In terms of the appeal mechanisms available with the ATO, ADR represents a process by which a “fair-minded person” – also known as an ADR practitioner – assists disputing parties to resolve or reduce the extent of the issues between them.643 In terms of Paragraph 23 of the Law

Administration Practice Statement 2013/3, ADR may be achieved through the following forms:

. Facilitative processes: An ADR practitioner aids the aggrieved parties in identifying

the disputed issues, developing solutions, considering other alternatives and

attempting to reach an agreement about the dispute in its entirety or in part644

. Advisory processes: An ADR practitioner provides advice on part or all of the facts

associated with the dispute, the law applicable to the disputed assessment and

potential outcomes645

. Determination processes: An ADR practitioner assesses the dispute and makes a

decision regarding the dispute646

Although no optimal time frame is provided for the facilitation, provision of advice or determination of such matters, it is recommended that the ideal point at which to initiate ADR procedures is during the review which is performed at the objection stage, before the conclusion of the final decision by the ATO.

642 Tran-Nam (2012). 643 Australian Taxation Office. 2018. 644 Leshego (2017). 645 ibid. 646 ibid.

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5.3.2.4. Settlement Agreement or Compromise on a Portion of Tax Debt

Settlement or compromise of tax debt is defined as an agreement made between parties to resolve matters in dispute, wherein one or all parties make concessions on what they consider to be the legally correct position.647 As in South Africa, the ATO affords taxpayers an opportunity to resolve a tax dispute by way of settlement.648 The parties involved in the dispute compromise on what they consider to be the “legally correct position”, which is done in terms of paragraph 2 of the Law Administration Practice Statement 2015/1.649 Settlement procedures may take place at any stage of the dispute, including the period prior to the raising of an assessment as stipulated in Paragraph 4 of the Law Administration Practice Statement

2015/1.650 When a settlement agreement is reached, it should be finalised in writing and signed by both parties.

In Australia, settlement or compromise of tax debt is regarded as part of good administration, and accordingly is consistent with good management of the tax system, overall fairness and best use of the ATO and other community resources.651 This has become known as “the good management rule” and has been endorsed by the courts.

5.3.2.5. Independent Review

The Independent Review Service was introduced by the Australian Taxation Office and came into effect from 1 July 2013.652 In providing this service, a reviewer, who has had no prior involvement in the tax audit process, evaluates the areas of disagreement from the perspective

647 Leshego (2017). 648 ibid. 649 Australian Taxation Office. 2015. Law Companion Ruling: purpose, nature and role in ATO's public advice and guidance. Available at https://www.ato.gov.au/law/view/document?DocID=COG/LCG20151/NAT/ATO/00001&PiT=9 9991231235958; last accessed 15 November 2018. 650 ibid. 651 Jone (2015:552-580). 652 Leshego (2017).

119 of both the ATO and the taxpayer to determine an enhanced perspective on the case.653 This service is available to entities with a turnover exceeding Australian $250,000. Another requirement is that this process is available only if the entity has received a Statement of Audit

Position that relates to the entity’s income tax, excise, goods and service tax or other forms of tax.654

Since the ATO aims to avoid or resolve disputes as early as possible, it is submitted that the independent review service is a vital platform in order to resolve, areas of disagreement and disputes in a timely fashion, prior to the issue of an amended assessment.655 In the case that

ADR, Independent Review or settlement have failed to resolve the dispute between the taxpayer and the ATO, either party may appeal to the courts or administrative tribunals to attempt to resolve the tax dispute.656

5.3.2.6. Courts and Administrative Tribunals

Australia is regarded as a developed or industrialised country and is a leader in the field of e- governance.657 It is a country in which reform was introduced long ago and a good ICT infrastructure and high literacy levels have been established.658 The e-governance policy of

Australia places emphasis on the return on investment gained through the application of ICT to improve service delivery to citizens.659

In 1997 the ATO established the Small Tax Claims Tribunal (STCT), which handles tax disputes involving amounts below $5,000 and has an emphasis on the mediation of disputes

653 Leshego (2017). 654 ibid. 655 Frost (2014). 656 Jone (2015:552-580). 657 Australian Communications and Media Authority. 2008. Digital Media Literacy. http://www.acma.gov.au/WEB/STANDARD/pc=PC_311474; last accessed 19 December 2018. 658 Allan, R. 2008. Open Government: Future Trends. Address to forum hosted by Cisco Systems Global Access Partners, Sydney. 659 Jantjies (2010).

120 and streamlined procedures, rather than formal hearings660. In addition, there are other platforms, such as The Administrative Appeals Tribunal (AAT), the Federal Court and the

High Court, which hear disputes concerning federal government taxes.661 According to

MMphahlele Leshego and Erasmus Henriett662, disputes concerning state taxes are heard by a state administrative decisions tribunal, the District Court or Supreme Court. The courts are detailed below.

(a) Administrative Appeal Tribunal (AAT)

The AAT is a judicial review body.663 Proceedings before the AAT are often

conducted in a manner similar to that of a court.664 Reviews of the decisions of

administrative agencies, including the ATO, may be performed by the AAT.

The decision of the AAT may replace the decision of the ATO.

(b) Federal Court

The Federal Court provides a platform for taxpayers who are dissatisfied with

the decision of the AAT to appeal its decision.665 Such an appeal is restricted

only to ‘questions of law’. An appeal to the Federal Court should be lodged

within 60 days after the taxpayer is provided with notice of the decision.666

Taxpayers or the ATO have the right to appeal to a Full Court of the Federal

Court if they are dissatisfied with the decision of the Federal Court.667 Either

660 Tran-Nam (2012). 661 ibid. 662 Leshego (2017). 663 ibid. 664 ibid. 665 ibid. 666 ibid. 667 Leshego (2017).

121

party has 28 days following the initial judgment of the Federal Court to process

an application to appeal the decision of the Federal Court.668

(d) The High Court

The High Court – the supreme judicial body in Australia – affords dissatisfied

taxpayers a platform on which to appeal the decision of the Full Court of the

Federal Court.669 An application to appeal its decision should be processed

within 28 days of the date of judgment of the Full Court of the Federal Court.670

(e) State tax disputes

The proceedings for tax disputes that are specific to State taxes are similar to

the proceedings for tax disputes at federal level.

5.3.3. Differences and Similarities

Unlike Namibia, which is a secular and unitary state,671 Australia has two levels of government

– federal and state – each of which separately imposes and administers its own taxes.672 The tax systems of both Namibia and Australia utilise a self-assessment model. This means that the taxpayer has to submit an annual tax return, which is a reflection of the taxpayer’s assessable income and the deductions and other credits to which the taxpayer is entitled.

One may agree that, the right to appeal against a tax assessment is probably the most fundamental right of the taxpayer. The right to object to and appeal against an assessment or decision is available in both in Namibia and Australia. In Australia, there is a standardised system for taxation appeals.673 Part IVC of the TAA establishes a uniform code of proceedings

668 ibid. 669 ibid. 670 ibid. 671 Article 1 of the Namibian Constitution says that the Republic of Namibia is a “sovereign, secular, democratic and unitary” state. 672 Leshego (2017). 673 Wheelwright (1997).

122 for the review of taxation decisions, formulated under Commonwealth tax statutes.674

Importantly for taxpayers, the commissioner is required to comply with the Code of Practice for Notification of Reviewable Decisions and Rights of Review, gazetted by the Attorney

General under the Administrative Appeals Tribunal Act 1975.675 Namibia does not have the same type of formalised procedure.

The Australian Tax Office (ATO) has developed a taxpayer charter, which clearly sets out both the ATO’s obligations and standards of service and taxpayers’ rights.676 The taxpayer charter explicitly defines the rights to appeal and review of many tax decisions, as well as access to less formal review mechanisms, and information about both the application of tax law and critical information held by the ATO.

Although Namibia does not have a taxpayer charter, it does however have a customer service charter.677 The customer service charter sets out the timeline of proceedings that the taxpayer can expect and, if not happy with the timeline experienced, the taxpayer has a channel through which to complain.678 The Australian taxpayer charter, on the other hand, outlines the way in which the tax authority should conduct itself when dealing with the taxpayer or taxpayer’s representative.679 The taxpayer charter helps taxpayers to understand their rights and obligations, what to expect from the tax office and what do if not satisfied. The two charters may be viewed as serving a similar purpose with regard to transparency, accountability and offering better service.

674 Australian Taxation Office (2015). 675 Wheelwright (1997). 676 Bentley, D. 2016. “Taxpayer Rights in Australia twenty years after the introduction of the Taxpayers’ Charter”. eJournal of Tax Research. Vol. 14 (2):291. Available at https://www.business.unsw.edu.au/About-Site/Schools-Site/Taxation-Business-Law- Site/Documents/Taxpayer_Rights_in_Australia.pdf; last accessed 12 November 2018. 677 Namibia Ministry of Finance. “Customer Service Charter”. Directorate: Public Private Partnerships to ensure a better service. Available at http://www.mof.gov.na/ppp_customer- service-charter; last accessed 11 October 2018. 678 Ibid. 679 Australian Government Inspector-General of Taxation. (2016).

123

Australia is regarded as a developed, industrialised country, and is a leader in the field of e- governance.680 Namibia has a long way to go to eliminate the barriers to effectively implementing its e-governance policy.681 It is apparent that the Namibian government is struggling with the full implementation of the e-governance policy it set out in 2016 with the aim of improving access to important information for the public and the media.682

A range of ADR processes, categorised into facilitative, advisory and determination processes are available in Australia.683 In Namibia, however, ADR processes are not available internally unless so directed by the court after the case has gone through litigation.684 This difference suggests that Namibia should introduce an independent mediation regime in order to avoid undue delays in the appeals system. This may help reduce waiting times for appeals as well as reducing the associated costs and stress for taxpayers, which are currently commonly associated with launching an appeal.

The Australian independent review process is specific to entities with a turnover greater than

Australian $250,000.685 This indicates that this process is directed towards large corporations.

Namibia, like South Africa, does not have such a platform. Again similarly to South Africa, the opportunity to make a settlement agreement or compromise on a portion of a tax debt is available in Australia, whereby an agreement is entered into between the taxpayer and the ATO to resolve matters in dispute by way of a concession.686 This dispute resolution platform is available to taxpayers prior to the consideration of litigation, helping to facilitate timely

680 Australian Communications and Media Authority. 2008. 681 UN (2008). 682 “Namibia’s baby steps towards e-governance”. 2018. The Patriot. Available at https://thepatriot.com.na/index.php/2018/02/09/namibias-baby-steps-towards-e-governance/; last accessed 11 October 2018. 683 Leshego (2017). 684 Nyanga (2016:32). 685 Leshego (2017). 686 ibid.

124 resolution of disputes without a lengthy litigation process.687 This platform is not available in

Namibia.

Australian and Namibian courts and tribunals may differ in name, but they provide taxpayers with almost identical access to court proceedings and options for objecting to and appealing against the decisions of lower courts or tribunals. However, the above comparison has highlighted examples of good practice which could be taken on as lessons in Namibia, such as:

. Restructuring or re-categorising objections into clusters, whereby objections to

assessment by individual and small business can be lodged within two years, or four

years for more complex matters, for example. However, this may delay the much-

needed collection of tax by the government.688

. Where the commissioner disallows an objection, facilitating the speedy resolution of

tax disputes through the use of ADR processes.689

. Allowing the Commissioner of Inland Revenue the discretionary power to enter into a

settlement or compromise agreement with taxpayers, particularly taxpayers with

overdue tax debts to settle, in order to bring more money into the state coffers. 690

. Introducing a small tax claims platform, which will assist in efforts towards taxing

informal sectors, whereby informal or small taxpayers can be brought into the tax

system.691 E-governance efforts can also be strengthened through taxpayer education

campaigns.692

5.4. Conclusion

687 ibid. 688 Leshego (2017). 689 Tran-Nam (2012). 690 Jone (2015:552-580). 691 Leshego (2017). 692 Australian Communications and Media Authority. 2008.

125

Using a comparison with other tax jurisdictions, this chapter presents good practices on how

Namibian dispute procedures can be improved. For example, it is revealed from the discussions that, the introduction of PAJA which created the TAA assisted, for example, South in fulfilling human rights through efficient and effective tax administrations. It is noted that, at this time, the TAA overhauled the fragmentation of provisions in the tax laws into one piece of legislation. The TAA oversee obligations of the tax authority to be aligned with the essential order of tax administration to the life cycle of the taxpayer, such as, dealing with tax assessments, objections and appeals, where procedures and guidelines of tax disputes settlements are simplified and gazetted. It would therefore be fair to argue that, adopting the verbatim will be beneficial to a country like Namibia, to engage conversation around this innovative tax administration legislation geared to ensuring that tax collection, disputes resolution occurs in orderly, structured, efficient and effective way and that taxpayers’ fundamental rights such as right embodied in Article 12 is not encroached on. Particularly, compared with South Africa and Australia, Namibia trails behind in the following aspects:

 ADR processes are available in South Africa and Australia.

 An independent review process is available in Australia

 In both South Africa and Australia the appeal process and rules regarding objections

and appeals are gazetted and made available to taxpayers

 In both South Africa and Australia, the appeals process is shorter, there are firm

timelines that compel the finalisation of objections and sitting of appeal hearings,

which came about as a result of the PAJA and TAA

 Namibia, as a developing country, is lagging far behind industrial countries like

Australia.693 For example, objections are centralised at the national head office and

693 UN (2008).

126

not dealt with at the regional level. Australia is regarded as a developed or

industrialised country and is a leader in the field of e-governance. It is a country to

which reform was introduced long ago, and a good ICT infrastructure and high literacy

levels have been established. The e-governance policy of Australia emphasises the

return on investment gained through the application of ICT to improve service

delivery to citizens.694

Going forward, with Namibia now looking at transforming the current Inland Revenue

Department into the Namibia Revenue Agency (NAMRA),695 the Namibian government may want to consider implementing a wider jurisdiction, enacting the PAJA and the TAA in the country, as well as creating an electronic office to manage appeals and objections through the new ITAS system. These two pieces of legislation are crucial to Namibia in the sense that, for example, the PAJA focuses on the right of taxpayers to just administrative action in terms of the Promotion of Administrative Justice and the procedural and substantive requirements for the enforceability of such rights.696 On the other hand, the TAA is intended to simplify and provide greater consistency in Namibian tax administration law. As a result of the gaps and areas of concern identified in the comparative analysis, where Namibia is lagging behind, and taking steps towards answering the research question, the next chapter will conclude this research and put forward recommendations that will significantly improve the procedures for resolving tax disputes in Namibia.

694 Jantjies (2010). 695 Namibia Revenue Agency (NAMRA) Act No. 12 of 2017. Available at http://www.lac.org.na/laws/annoSTAT/Namibia%20Revenue%20Agency%20Act%2012%20of %202017.pdf; last accessed 20 November 2018. 696 Kotzé, L. J. 2004. “The Application of Just Administrative Action In The South African Environmental Governance Sphere: An Analysis Of Some Contemporary Thoughts And Recent Jurisprudence”. Potchefstroom Electronic Law Journal. Vol. 7 (2). Available at http://www.nwu.ac.za/files/images/2004x2x_kotze_art.pdf; last accessed 11 November 2018.

127

CHAPTER 6: Conclusion and Recommendations

6.1. Introduction

In restatement of the research question, the purpose of this study was to improve the processes for resolving tax disputes within a reasonable time in Namibia, in respect of taxpayers’ right to a fair hearing. This was achieved through the use of a thorough and legal comparative analysis of Namibia with both South Africa and Australia, examination of relevant case law and, most importantly, guided by the following objectives:

i. Improving on the time taken to respond to objections and appeal requests;

ii. Improving the processes for convening tax tribunals/special courts and appointing of

the members to such forums;

iii. Ensuring that the rules, processes and standards of tax dispute resolution are accessible

to the taxpayer in order to foster proper communication and tax compliance; and

iv. Enacting the Tax Administration Act to govern the rules and procedures of objections

and tax appeals

The comparative analysis in Chapter 5 revealed a number of areas of concern in which action could be taken to significantly improve the procedures for resolving tax disputes in Namibia and guarantee fair hearings in relation to tax matters. First, the most concerning revelation is that Namibia does not have a tax administration act.697 This is primarily problematic in that, as can be seen in other jurisdictions, such an act provides guidelines as to the procedures of the dispute process, the different recourses which taxpayers can pursue and how tax courts and/or tribunals should be constituted, in terms of the members thereof and their standing. The existence of such an act, in itself, creates a concrete legal place of reference for both the state

697 For example one of the rationale to enact the South African Tax Administration Act No. 28 of 2011 was to provide for the alignment of the administration provisions of tax Acts and the consolidation of the provisions into one piece of legislation to the extent practically possible and to provide for dispute resolution just to mention a few.

128 and the taxpayer.698 It provides a base and serves as a guideline for both parties on what to do in various legal circumstances. For example, where should the taxpayer go to for recourse in the first instance? What should they expect at each stage? When and how should they escalate an issue to ensure they are heard? Solid answers to all of the above are currently missing from the Namibian legal system. A few specific examples from the tax dispute resolution process show that that (i) tax tribunals and special courts do not convene often enough and, when they do, it is never abundantly clear to the taxpayer what the available options are; and (ii) the composition of such courts is often questionable, as this research has revealed a number of anomalies around the appointment process. The members selected for such panels could be better qualified, with expert knowledge on the subject matter.

Second, this study has shown that there is indeed a relationship between tax and administrative law. By virtue of the fact that the tax administration is deemed to be an administrative body as outlined in Article 18 of the Namibian Constitution, it ought to be obliged to follow administrative and common law principles, as provided in Article 66 of the Namibian

Constitution, during the execution of its work.699 This means that sacrosanct legal principles, such as the right to be heard, must be incorporated and adhered to at all times.

Having said that, it is also clear that, the weakness in administrative capacity should not avert the country from adopting the best practices. Fixing the gaps identified, is dependent on the government political readiness, its commitment in maximising revenue, its institutional cooperation and administrative capacity to satisfactory reap the benefits of settling disputes within a reasonable time as envisage in Article 12 of the Namibian Constitution. This study does not in any way intend to suggest that the current dispute resolution system is completely ineffective; but rather to draw attention to the fact that there is a need for a serious degree of

698 Johannes (2014). 699 Wolf (2012:98-187).

129 consolidation, redrafting and regrouping. Following up on the content analysis laid out in this study, this chapter concludes the study and gives recommendations for future action.

6.2. Recommendations

Considering the conclusions of the study in the above section and the objectives of the study, the following recommendations are proposed:

 To improve on the time, to respond to objections and appeal request, the tax appeals

system should be managed through an electronic office, where comprehensive

information concerning appeals is available. Both South Africa and Australia have e-

filing systems and e-governance, through which returns, objections and appeals can be

submitted and responded to.700 The ATO offers simple interaction and maximised

automation with taxpayers to reduce the costs associated with tax compliance.701

Appeals can then be submitted electronically, and the taxpayer can, where practical,

submit documents and log in to monitor the progress of their appeal.

 In order to improve the processes for reviewing the objections and convening the tax

tribunal/special courts and appointing of the members to such forums, there should be

a separate body or committee, acting independently of the tax administration both in

appearance and in fact, known by and accessible to taxpayers, to handle the initial level

of tax objections, existing within the tax authority.702 In addition, the objection and

appeal process should be time-bound at each level.703 This will enable the taxpayer to

make an informed decision as to whether to pursue an appeal and ensure that all parties

have a better understanding of the relevant matters. This can be achieved through the

700 UN (2008). 701 Australian Communications and Media Authority. 2008. 702 Thuronyi (2013). 703 SARS (2012).

130

enactment of a tax administration act, such as the South Africa Tax Administration Act

28 of 2011 by ensuring that:

 Objection and appeal officers operating within the tax authority must be properly

trained, as the ATO has achieved through its Law Administration Practice

Statements, which provide direction to ATO staff members on the approaches

which should be taken when performing duties involving the law administered by

ATO.704 This will assist the staff in attending to and resolving the majority of

objections and appeals at the first level of a taxpayer’s objection, and will ensure

that tax matters are adjudicated by a focused group of knowledgeable professionals

in a manner that reflects the provisions of the law and any relevant guidelines.

 Furthermore, the selection and composition of the panel of appeal must be

streamlined to allow befitting and properly qualified officials to adjudicate on such

matters.705 In addition, the criteria used in selecting the members of both the

objection review committee and the appeal board must be reviewed to reflect the

impact on impartial decision-making, ensuring the fairness and neutrality of

decisions passed by these institutions.706 This has been achieved in Lesotho through

the enactment of the Revenue Appeals Tribunal Act No. 2 of 2005,707 which

provides for the appointment of members to the tribunal and their required

experience in taxation matters. This may be a good lesson to be learned from in

Namibia. This can possibly be achieved through the establishment of the revenue

authority as envisaged by the Namibia Revenue Agency Act 12 of 2017 in its

704 Australian Taxation Office (2018). 705 Blank, J. D. (2016) 434. 706 Schwartz, B. 1953. “Administrative Procedure and Natural Law”. Notre Dame Law Review 169. Available at http://scholarship.law.nd.edu/ndlr/vol28/iss2/1; last accessed on 23 April 2018. 707 Section 4(2)(c) of the Revenue Appeals Tribunal Act No 2 of 2005 clearly require legal practitioner with special knowledge or skills relevant to the exercise of the power of the Tribunal or has significant experience in taxation matters.

131

objective of attracting staff with more specialised skills as a result of exemption

from the Public Service remuneration structure.708

 To ensure separation of power adherence, the appointment of tribunal members and

budgets should not rest with the minister(s) concerned with the subject matter of

the adjudication.709 Not only the mode of appointment but also the organisational

structure of the tribunal system needs to be designed to foster the independence of

such institutions.710There must also be an uncompromised requirement for such

appointed persons to be well versed in the common and administrative law rights

of the taxpayer.711 It remains crucial that any dispute resolution processes adhere to

the sacrosanct right to be heard, as this forms the very pinnacle of our law.712 For

example, in Australia, there is a special Tax Adviser713 to the Ombudsman and

supported by a team of tax experts, whose role it is to “serve as a check to

administrative errors open up another avenue for independent review of ATO

action, and significantly improve equity in the tax system”. There must be an

independent tax ombudsman which is independent of the tax authority – which

could be achieved by strengthening the current ombudsman – in order to provide

taxpayers with a fair and simple way to seek a resolution to a service, procedure or

administrative dispute they have unsuccessfully tried to resolve through the tax

authority. The tax ombudsman would at this point step in and help hasten the

process. For example, South Africa has a Tax Ombudsman Office which ensures

708 Kaira, C. 2018. “Namibia Revenue Agency to be benchmarked against the best in Africa”. Windhoek Observer. 709 Wolf (2012:98-187). 710 Nyanga (2016:32). 711 The Code of Good Administrative Conduct. 712 Article 12 of the Namibian Constitution provides for a fair hearing. 713 Miles, S. “The Price We Pay for A Specialised Society: Do Tax Disputes Require Greater Judicial Specialisation?” Victoria University of Wellington Law Review. Vol. 46 (2):361-414. Available at https://www.victoria.ac.nz/law/research/publications/vuwlr/prev-issues/volume- 46,-issue-2/Miles.pdf; last accessed 14 October 2018.

132

that SARS lives up to the declarations contained in the Service Charter.714 In

Australia, there is a special Tax Adviser to the Ombudsman supported by a team of

tax experts, whose role it is to “serve as a check to administrative errors open up

another avenue for independent review of ATO action, and significantly improve

equity in the tax system”.715

 Since the Namibian Income Tax Act does not in any of its provisions compel the

Commissioner to carry out any of his duties within a specific timeframe, as does

the South Africa Tax Administration Act (TAA), introducing an independent

mediation regime (a form of ADR) may provide a solution to this issue. By learning

from the South Africa Tax Administration Act,716 Namibia can amend its objection

and appeal procedures to include ADR. This may help reduce waiting times for

appeal, as well as the costs and stress for taxpayers which are associated with taking

an appeal case at present. The Australian Taxation Office (ATO) has an improved

Alternative Dispute Resolution (ADR) system717 with consistent and clear

information provided to the taxpayer to understand their rights and entitlements to

a fair hearing.718 The settlement of tax disputes through a process of mediation,

something prevalent in South Africa, is almost completely absent in Namibia.719

Thus, the above may serve as a good practice for a country like Namibia to seek

some fundamental changes to the legislation which is believed necessary to allow

the current objection and appeal system to achieve its objectives and operate in

consideration of the rights of taxpayers to a fair hearing within a reasonable time.

714 Omarjee, L. 2018. “SARS kicks off tax season with charter outlining taxpayers' rights”. Fin24. 715 Richardson (1984). 716 SARS (2014). 717 NADRAC (2003). 718 Bentley (2016:291). 719 SARS (2014).

133

 To ensure that the objection and appeals rules, processes and standards of tax dispute

resolution are accessible to the taxpayer, it must be documented, gazetted, simplified

and made available to taxpayers to allow them to reap the benefits of such guidelines,

such as ample time to present their case or options as to which course to take when

faced with the prospect of a dispute.720 Both South Africa721 and Australia make

available information on the appeal process and rules for objections, which are gazetted

and available to taxpayers. This practice will promote better dissemination of

information and transparency for taxpayers. Further, when made available, such

guidelines will equip the taxpayer with knowledge that allows them to challenge the

tax authority where necessary, thus encouraging the tax authority to be diligent in its

work and creating room for policy reformulation if needed.

Through taxpayer education, special assistance should be made available to small and

medium enterprise taxpayers to help them prepare for objections and appeals. The ATO

established the Small Tax Claims Tribunal in 1997, which handles tax disputes

involving amounts below N$5,000, with an emphasis on mediation of disputes and

streamlined procedures, rather than formal hearings.722 To cater for the small taxpayers,

Namibia may introduce a system of anonymised tax rulings to provide taxpayers with

certainty on how a transaction will be treated for tax purposes in the future.723 Appeals

rulings must be published, without disclosing the names of the taxpayers involved to

provide awareness not only to the small taxpayers but to all taxpayers.

720 SARS (2014). 721 South African Revenue Serviced (2014). 722 Leshego (2017). 723 Blank (2016).

134

The above recommendations can easily be achieved through enacting a Tax Administration

Act, as has been effectively legislated in South Africa, Australia and other countries. This would be able to address the bulk of the concerns highlighted in this study.

6.3. Conclusion

This study has emphasised the importance of paying tax to any national economy.724 Although it is inevitable that disagreements between the taxpayer and receiver of revenue will occur, it remains important to consider the taxpayer’s rights to a fair hearing without undue delays.725 It has been observed that paying tax is in no way a modern phenomenon, since taxes have been levied since time immemorial, dating back to ancient civilisations such as the Greeks and

Romans.726 Most African states inherited the fiscal institutions established by their previous colonial administrations.727 It is argued that the full depth of the history of taxation in Namibia remains an unexplored area.728 In Namibia, taxes are imposed by the legislative power through the Income Tax Act No. 24 of 1981.729The relationship between the taxpayer and the tax authority can often be contentious because of differences between the taxpayer’s tax return or assessment and the tax authority’s final decision on the assessment.730 However, taxpayers are entitled by law to object to and appeal against the decision of the receiver of revenue.731 It is

724 Prichard (2009). 725 Thuronyi (2013). 726 New Internationalist (2008). 727 Gardner (2012). 728 Wolf (2012:98-187). 729 Section 5 read with section 83 of the Income Tax Act provide for the levying of normal tax and recovery of taxes for the benefit of the State Revenue Fund and transfer of a part thereof to the revenue funds or representative authorities. Section 2 of the Income Tax Act provide for the administration of the Act that “The Minister shall be responsible for carrying out the provision of this Act.” 730 Thuronyi (2013). 731 Section 73(1) of the Income Tax Act provides that “Any person entitled to make an objection who is dissatisfied with any decision of the Minister as notified to him or her in terms of section 71(4) may, subject to the provisions of section 73A, appeal therefrom to a special court for hearing income tax appeals, constituted in accordance with the provisions of this section.

135 the existing procedures being followed and the available platforms that are currently cumbersome and need to be improved to conform to Article 12 of the Namibian Constitution.732

The importance of resolving tax appeals and the right of the taxpayer to be heard within in a reasonable time is a core aspect of tax justice.733 Thus, the law needs to specify a time limit within which the tax authority must provide decisions timeously and to ensure fairness that tax matters are finalised without delays.734

Tax administration law is concerned with the fairness of the procedures involved in tax audits and disputes, as well as the perceived treatment the taxpayer receives from the tax authority.

Taxation procedures, as currently practiced, involve the taking of administrative action by the executive branch of government, and must therefore comply with Article 18735 of the Namibian constitution.736 Placing the taxpayer at the centre of proceedings by improving and aligning the tax dispute resolution procedures is a desirable goal.737

In comparison to South Africa and Australia, Namibia trails behind in terms of new developments where tax disputes are concerned. First, the most concerning revelation is that

Namibia does not currently have its own tax administration act. This is primarily problematic in that, as seen other jurisdictions, such an act provides guidelines as to how tax courts and/or tribunals must be constituted, the members thereof and their standing, the procedures to be

732 Nyanga (2016) page 32. 733 Tran-Nam (2012). 734 ibid. 735 Article 18 of the Namibian Constitution provides that “Administrative bodies and administrative officials shall act fairly and reasonably and comply with the requirements imposed upon such bodies and officials by common law and any relevant legislation, and persons aggrieved by the exercise of such acts and decisions shall have the right to seek redress before a competent Court or Tribunal.” 736 Section 2 read with section 3 of the Income Tax empowered the Minister to administer the Act and to be responsible for carrying out the provisions of the Act. 737 Thuronyi (2013).

136 taken with respect to the dispute process itself and also the different recourses that a taxpayer can pursue.

The existence of such an act, in itself, creates a concrete legal reference point for both the state and the taxpayer.738 As highlighted in the introduction of chapter 5, the tax administration act provides a foundation and serves as a guideline to both parties on what to do in various legal circumstances. For example, where should a taxpayer go to for recourse in the first instance?

Perhaps ADR, or an independent review process. What should they expect at such a stage?

This information may be gazetted or made available to the taxpayer. When and how should they escalate an issue and ensure they are heard? They may refer to explicit timelines for the finalisation of objections and appeals. All of the above responses are currently missing from the Namibian legal system. The specific examples we have seen from the tax dispute resolution process show that that (i) tax tribunals and special courts do not convene often enough and, when they do, it is never made entirely clear to the taxpayer what the available options are; and

(ii) the composition of such courts is questionable, as this research has revealed a number of anomalies around the appointment process; i.e. the selected members of such panels should be better qualified, with expert knowledge on the subject matter.

Second, Namibia, as a developing country, is lagging far behind South Africa and Australia in terms of e-governance. South Africa has made tremendous developments in e-governance, such as e-filing and finalising disputes via e-governance, although it does still experience challenges due to a lack of skills in rural regions.739 Australia is regarded as a developed or industrialised country and is a leader in the field of e-governance.740

738 Johannes (2014). 739 UN (2008). 740 Australian Communications and Media Authority. 2008.

137

Third, this study has shown that there is indeed a relationship between tax and administrative law. By virtue of the fact that tax administrations are deemed to be administrative bodies as outlined in Article 18 of the Namibian Constitution, they ought to be obliged to follow administrative and common law principles, as provided in Article 66 of the Namibian

Constitution, during the execution of their work. This means that sacrosanct legal principles, such as the right to be heard within a reasonable time, must be incorporated and adhered to at all times.

In conclusion, this study does not in any way intend to suggest that the current dispute resolution system in Namibia is completely ineffective, but rather to highlight the fact that there is a need for a serious degree of consolidation, redrafting and regrouping. Based on the content analysis made in this study, this chapter concludes the study, providing the above recommendations for future action.

138

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https://foreignminister.gov.au/speeches/2010/100319_australia_and_africa.html; last

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